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Samsung Tips Best Quarterly Profit in Over Three Years as Chips Soar

Samsung Tips Best Quarterly Profit in Over Three Years as Chips Soar

By Reuters | Updated: 7 April 2017 10:00 IST

Samsung Electronics Co Ltd forecast on Friday its best quarterly profit in more than three years in the January-March period, beating expectations and putting it on track for record annual earnings on the back of a memory chip super-cycle.

The Apple Inc rival has rapidly recovered from last year's costly failure of its fire-prone Galaxy Note 7 device, despite a political scandal involving Vice Chairman Jay Y. Lee who appeared in a Seoul court on Friday facing charges including bribing ousted president Park Geun-hye.

The global memory chip leader said first-quarter operating profit was likely KRW 9.9 trillion ($8.8 billion or roughly Rs. 56,669 crores), compared with an average forecast of KRW 9.4 trillion from a Thomson Reuters survey of 18 analysts. Revenue rose 0.4 percent to KRW 50 trillion, just ahead of analysts' forecasts.

"The semiconductor business was likely the main driver for earnings," said Heungkuk Securities analyst Lee Min-hee, adding that sales of mid-to-low tier smartphones also helped the mobile business remain profitable.

Samsung shares touched a record high of KRW 2.134 million in late March on expectations of record annual profit in 2017, as the South Korean tech giant bounced back from the embarrassing withdrawal of its Galaxy Note 7 devices due to combustible batteries.

Investors and analysts expect Samsung to report its best-ever quarterly profit in April-June, with the Galaxy S8 smartphone hitting the market on April 21 in Samsung's first premium device launch since the Note 7's withdrawal in October.

Some researchers forecast the S8, which sports the largest screens for Samsung high-end smartphones to date, to set a new first-year sales record.

"Samsung will look to recover market share they lost last year and pump up volumes even if they have to spend more to do so," IBK's Kim said.

All this is happening amid management upheaval at South Korea's biggest family-run conglomerate, with third-generation leader Lee embroiled in a scandal that has already led to Park's removal from office for allegedly receiving bribes.

Lee was arrested in February over his alleged role in a corruption scandal. He denies any wrongdoing.

Chips sizzle
While Samsung will not provide detailed earnings results until the end of April, analysts tipped its chip division to earn a record KRW 5.8 trillion in January-March and propel the firm to its best overall operating profit since the third quarter of 2013.

Favourable memory market conditions will likely persist throughout 2017 due to diminishing production gains on investments and careful capacity management among chipmakers.

Growing demand for more firepower from devices such as smartphones and servers have also helped push up margins for Samsung and its rivals in recent quarters.

Samsung shares were down 1.2 percent in early Friday trade, underperforming a 0.2 percent fall for the broader market on profit-taking pressures.

The stock rose 14 percent in January-March, its strongest gain since the first quarter of 2012.

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