Samsung set to declare second year of profit

Samsung Electronics Company Limited is on track to post its second consecutive year of record earnings as a rebound in its semiconductor business shields the South Korean tech giant from a slower smartphone market.

The world’s biggest memory chipmaker is likely to see its semiconductor earnings charge to a three-year high — a much-needed shot in the arm — just as sales of its flagship Galaxy S4 smartphone begin to flag, analysts say.

Reuters reported that the global chip market has rallied since late 2012 due to a supply crunch caused by years of cautious investment to support prices, and conversion of factory capacity to produce more profitable chips used in smartphones and tablets.

The market further tightened following a fire in early September at a China plant owned by SK Hynix, the world’s No.2 chipmaker.

The drop in supply helped divert customers to Samsung, whose heavy investment in cutting-edge chip-making technologies has made it head and shoulders above smaller rivals like Micron Technology Incorporated.

“As of now, there is no real competitor for Samsung in the (memory) chip business,” said Lee Seung-woo, a tech analyst at IBK Investment & Securities. “This dearth of players is expected to allow Samsung to post considerable operating profits throughout this year and next year, even if demand flags.”

Samsung is estimated to post an operating profit of 38.5 trillion won ($35.85bn) this year, up a third from 2012, according to a survey of 45 analysts by Thomson Reuters. The company said on Friday operating profit is likely to reach a record 10.1 trillion won in the third quarter.

Contract dynamic random access memory chip prices jumped by nine per cent in the second half of September from the first half of that month while spot prices soared 37 per cent.

UBS estimates supply of DRAM chips by SK Hynix would shrink by 14 per cent in the fourth quarter, plunging the overall DRAM market into a supply deficit of some seven per cent. The South Korean firm aims to fully restore operations in November.

Shares in Samsung ended Friday unchanged, after advancing as much as 3.1 per cent on Wednesday prior to the earnings guidance announcement. Financial markets in South Korea were closed on Thursday due to a public holiday.

Samsung estimated third-quarter operating profit rose by 25 per cent from a year earlier, the slowest since the third quarter of 2011 when profit shrank 11 per cent.

Samsung’s mobile devices business has helped the company report a record profit every quarter since last year, except the first three months of 2013.

The division, which generates two-thirds of the company’s total earnings, is stalling as sales of the Galaxy S4 slow and the high-end market rapidly saturates, analysts say.

“The concern that high-end smartphones could see slower growth is a valid one. But Samsung has both the speed and fast-follower tendencies of Zara and a portfolio spanning high- and low-end products as well as components such as a brand like Swatch,” Lee at IBK said.

View Source
Join thousands of Nigerian who use Ngcareers to discover new vacancies that interest them, follow updates on their career areas. Go here to Start Using Ngcareers FREE

About ngcareers

Ngcareers is Nigeria's top jobs and careers community for working professionals and jobseekers to find interesting opportunities, discover and share insights based on their career interests. Click Here to Join. You can Connect with Ngcareers on Twitter, Google Plus, Facebook or Linkedin

Leave a Comment