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Samsung is smashing it with record earnings, despite a corruption scandal

Samsung has shrugged off scandal to announce a record profit.
The South Korean electronics giant was propelled to record profit in the second quarter of 2017, and this boom is likely to continue into the third - just as revenue is widely expected to benefit from sales of OLED screens to Apple.

The world's biggest maker of memory chips, smartphones, and TVs is now placed to smash its annual profit record after a better-than-forecast performance in its mobile business lifted April-June profit slightly above its early-July guidance, analysts said.

"Looking ahead to the third quarter, the company expects favorable semiconductor conditions to continue," Samsung said in a statement on Thursday. "Although overall earnings may slightly decline quarter-on-quarter as earnings weaken for the display panel and mobile businesses."

Memory chip makers are enjoying a so-called super-cycle where increasing demand for more sophisticated devices, such as cloud-computing data center servers, requires higher numbers of more expensive chips. That has brought about a supply shortage which is pushing prices even higher and widening profit margins.

Chips were Samsung's top earner in the three months through June, as more than tripled from the same period a year earlier to a record 8 trillion won ($7.20 billion). Continued demand for DRAM and NAND chips and supply constraints are likely to sustain profit margins for the foreseeable future, Samsung said.

A 73% jump in profits...
Overall, Samsung in a filing said operating profit rose 72.7% to 14.1 trillion won in the second quarter, versus 14 trillion won estimated in July. Revenue rose 19.8% to 61 trillion won, also in line with its earlier estimate.

It also announced its third share buyback of the year - 1.7 trillion won worth of common shares - as part of a planned annual total of 9.3 trillion won, and said it would cancel shares worth 2 trillion won.

Samsung's share price closed down 0.1%, versus a 0.4% rise in the Kospi benchmark index.

The Galaxy S8 is selling well
In its mobile division, Asia's third most-valuable company by market value reported a 4.7% fall in profit, slightly milder than the decline forecast in early July.

Mobile chief Koh Dong-jin this month said cumulative sales of new flagship Galaxy S8 and S8+ smartphones, released April, were 15% higher than those of its predecessor. In a statement, the company said the new devices "have outsold the Galaxy S7 series in almost all regions."

However, the firm expects mobile earnings to dip in the third quarter as S8 sales trail off, mid- to low-tier models take up a larger share of total shipments, and marketing costs increase for the Galaxy Note 8, unveiled on Aug. 23 in New York.

"The mobile business might be slightly weaker in the third quarter because the second quarter was so strong," said analyst Greg Roh at HMC Investment & Securities. "But the expected sales from OLED display supply to Apple is seen to be reflected in earnings starting in the third quarter."

Apple and scandals
Apple is widely tipped to adopt Samsung's organic light-emitting diode (OLED) display for the next iPhone, which is expected to launch in the second half of the year. Subsidiary Samsung Display Co Ltd has an over 90% market share in smartphone OLED screens - meaning the expected success iPhone 8 will further boost Samsung's business.

However, price competition in liquid-crystal displays (LCD) used in low- and mid-tier handsets is expected to cut margins.

Samsung's record earning come as the firm's Vice Chairman Jay Y. Lee is in detention while on trial for his alleged role in a corruption scandal involving South Korea's former president Park Geun-Hye. He has denied wrongdoing.

The lower court ruling on the case is likely to come before Lee's current detention period ends on August 27.

  • Publish Date

    29 Jul,2017
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