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Samsung posts $7.4 billion profit, handsets mask weak chips
Samsung, the South Korean company has been doing really good for the last four quarters. It has posted it’s fourth consecutive quarterly profit.
This quarter Samsung made $7.4 billion, most of which came from strong sales of its mobile phones which actually hid the fact that they had a really hard time selling memory chips.
The record run, though, is likely to end in December, with profit growth slowing even more next year as TV markets stagnate and growth in the high-end smartphone market eases from the recent breakneck speed. Profit is expected to grow 16 percent next year down from a forecast 73 percent this year, according to Thomson Reuters I/B/E/S.
“The biggest concern for Samsung is that its smartphone growth momentum will slow. It’ll be difficult for Samsung to maintain such a high profit margin from handsets as the market gets crowded and competition will intensify,” said Nam Dae-jong, analyst at Hana Daetoo Securities.
Samsung said July-September operating profit almost doubled from a year ago to 8.12 trillion won, in line with its earlier estimate.
Reporting its results just hours after main rival Apple Inc, Samsung did not detail its third-quarter smartphone shipments, though these are estimated to have soared to 58 million. Apple, which launched its latest iPhone 5 on September 21, said it shipped 26.9 million iPhones in July-September
Third-quarter profit at Samsung’s chip division, which competes against Toshiba Corp and SK Hynix, dropped 28 percent to 1.15 trillion won as prices of dynamic random access memory (DRAM) chips sagged, though a recovery in NAND flash chips, widely used in mobile devices, helped offset the weakness.
The company said on Friday it expected DRAM oversupply to run on into the current quarter, but sees a tight NAND flash memory market.
Samsung competes against Sony Corp and LG Electronics Inc in televisions, and LG Display in screens.
The good news for Samsung is that more electronics vendors are reshuffling their products to make more tablets and slim ultrabooks, which consume expensive flat-screens, more sophisticated packaged chips and memory chips.
“That key component market is getting tighter, thanks to the mobile boom. There are now lots of IT companies producing tablets and ultrabooks. This will restore the component supply imbalance, which has been extremely skewed to Apple due to its huge bargaining power,” Kim Sung-in, an analyst at Kiwoom Securities, said ahead of the earnings release.
