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Components to drive up Samsung’s Q3 profits

[THE INVESTOR] Expectations are high on Samsung Electronics’ third-quarter profits after the company released its second-quarter earnings guidance that beat analyst estimates on July 7.

According to its tentative earnings report, the Korean tech giant posted more than 8 trillion won (US$7.6 billion) in operating profits and 50 trillion won in sales in the April-June period.

Analysts say the company will continue the current momentum in coming months. 

Samsung Electronics’ headquarters in Suwon, Gyeonggi Province
Samsung Electronics’ headquarters in Suwon, Gyeonggi Province

Despite a modest growth in mobile business that makes up almost half of the company’s revenue, its chip and display businesses are expected to drive up sales overall.

FnGuide, a local financial information provider, estimates Samsung to post 7.2 trillion won in operating profits and 51.4 trillion won in sales in the July-September period.

The memory chip business is expected to gain a big boost from the third quarter as DRAM prices are recovering. Demand for its SSD or solid-state drives is also growing among corporate clients.

With its chip shipments surging 20 percent in the third quarter, the semiconductor business division alone is expected to see 3.4 trillion won in operating profits.

The display business, which succeeded in turning around in the second quarter, will further improve profits, largely buoyed by robust sales of organic light-emitting diode panels for mobile devices.

Samsung dominates more than 90 percent of the mobile OLED market. With Apple’s planned OLED adoption next year, other smartphone-makers, including those of China, are expected to follow the suit.

In the meantime, the mobile business is likely to see a modest decline in profits.

Apple’s iPhone 7 launch, planned in September, will affect Galaxy S7 sales directly, increasing marketing costs for the company overall.

Samsung plans to defend its market share in the latter half with its new Note phablet, tentatively called Galaxy Note 7, that comes out in August.

“The mMobile business division will see a modest profit loss due to slowing Galaxy S7 sales and increased seasonal costs in the third quarter,” said Song Myung-sub, an analyst of HI Investment & Securities.

“But improved profits in display and chip businesses will fill up the loss.”

The analyst predicted the company’s third quarter profits could slightly improve compared to the second quarter.

By Lee Ji-yoon (jylee@heraldcorp.com)
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