Tags: Samsung | Profit | Galaxy | Chip

Samsung Profit Surges on Galaxy Sales, Firmer Chip Prices

Thursday, 24 Oct 2013 08:17 PM

 

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Samsung Electronics Co., Asia’s biggest technology company, posted higher third-quarter earnings on increased sales of cheaper Galaxy smartphones and a rally in memory-chip prices.

Net income, excluding minority interest, rose 25 percent to 8.05 trillion won ($7.6 billion) in the third quarter, from 6.42 trillion won a year earlier, the Suwon, South Korea-based company said in a regulatory filing Friday. That compares with the 7.94 trillion-won average of 24 analyst estimates compiled by Bloomberg.

Sales of cheaper smartphones in emerging markets such as China, South America and eastern Europe curbed the impact of stalling demand for high-end handsets, competition from new Apple Inc. iPhones and shrinking television profit margins. Chip prices surged last month amid a supply crunch after a fire at SK Hynix Inc.’s plant in China, and Samsung started selling its Galaxy Gear smartwatch to tap demand for wearable devices.

“Samsung’s making big money from high-end smartphones, such as the Galaxy S series and Note devices, but people might have overlooked that it’s not the whole story,” Lee Do Hoon, an analyst at CIMB Group Holdings Bhd in Seoul, said before today’s announcement. “It’s also deepening its pockets with money from cheaper smartphones.”

Shares of Samsung rose 0.5 percent to 1,449,000 won in Seoul trading Thursday. The stock has dropped 4.8 percent this year while the benchmark Kospi has gained 2.5 percent.

Third-quarter operating profit was 10.2 trillion won, compared with a preliminary estimate of about 10.1 trillion won given by the company Oct 4. Sales were 59.1 trillion won, compared with earlier estimate of about 59 trillion won.

Smartphone Shipments

Samsung’s third-quarter smartphone shipments probably rose 14 percent to 86 million units from the previous three months, according to estimates from IBK Securities Co. analyst Lee Seung Woo. Galaxy S4 sales may have fallen to 17 million units in the September quarter from about 20 million in the previous three months, Lee said.

Apple sold a record 9 million iPhones in the first weekend of sales last month as it rolled out the 5s and 5c to markets including China, Japan and the U.S.

“The Apple versus Samsung smartphone war is still focused squarely on the premium-tier for now,” Neil Mawston, an executive director at researcher Strategy Analytics, said in an e-mail. “Apple is feeling the heat from Samsung in the smartphone premium-tier and the slightly cheaper iPhone 5c is Apple’s competitive response to the Samsung threat.”

Round, Golden

Samsung is rolling out new devices to target both high- and lower-end consumers. This month, the Galaxy Round, its first smartphone with a curved display, went on sale along with the Note 3 and the Galaxy Gear wristwatch device released last month that can make phone calls, check e-mails and take photos.

Samsung’s two biggest challenges ahead are to maintain its mobile phone leadership in China and the U.S., Mawston said.

“Chinese brands are hungry for growth at home, while Apple is desperate to regain top spot in its American heartlands,” he said.

The mobile unit, responsible for about two-thirds of Samsung’s earnings, posted operating profit of 6.7 trillion won, up from 5.63 trillion won a year earlier.

Samsung, the world’s largest chipmaker, is benefiting from a rally in prices after a fire at competitor SK Hynix Inc.’s plant in Wuxi, China, last month and new handsets from smartphone rivals that use its components.

Chip Prices

The benchmark DDR3 2-gigabit dynamic random-access memory chip traded at $2.13 Thursday, compared with $1.60 on Sept. 4 when the fire hit Hynix’s factory, according to DRAMeXchange, Asia’s largest market for the components.

“Both Samsung and SK Hynix are ramping up PC DRAM capacity, but demand is still outstripping supply,” KTB Investment & Securities Co. said in an Oct. 17 report. “The DRAM chip price will continue to rise until the end of the year because of the supply shortage.”

The A7 processor inside Apple’s new iPhone 5s was made by Samsung, according to a teardown of the handset by IFixit. Samsung processors also are in other iPhones as well as the iPad and iPad mini, according to Barclays.

Operating profit from the chip division was 2.06 trillion won, compared with 1.02 trillion won a year earlier.

Profit at Samsung’s consumer-electronics division, which oversees the TV and home-appliance businesses, was 350 billion won, compared with 400 billion won a year earlier.

TV makers are reeling from sluggish demand, especially from China, while tougher competition is accelerating price reductions. Global shipments for liquid-crystal display TVs may fall 0.7 percent to 205.1 million units for this year, market researcher TrendForce said Aug. 22. The final figure may be as low as 202 million units, it said.

Samsung’s display division, which dominates the market for panels using organic light-emitting diodes, had an operating profit of 980 billion won in the third quarter, compared with the 1.17 trillion won a year earlier.

© Copyright 2014 Bloomberg News. All rights reserved.

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