Samsung heads for best profits in three years as chip sales surge

Samsung Electronics projected its best quarterly operating profit in more than three years thanks to solid component sales, shrugging off turmoil at home where the conglomerate’s de facto leader Lee Jae-yong has been caught up in a sweeping corruption scandal.

Booming sales of memory chips and flat-panel displays have helped the South Korean technology group stage a strong comeback in the wake of last year’s costly safety debacle and ultimate demise of the fire-prone Galaxy Note 7 smartphone.

Operating profit for the first three months of this year was estimated at Won9.9tn ($8.7bn), up 48 per cent from a year earlier, Samsung said on Friday. This was higher than the Won9.4tn average forecast in a Thomson Reuters poll. Sales were projected to have inched up to Won50tn.

“Earnings from components, especially semiconductors, are so strong that they can more than offset the huge losses from last year’s Note 7 failure,” said Lee Seung-woo, an analyst at IBK Securities.

Memory chips and flexible displays accounted for about 68 per cent of Samsung’s operating profit in the final quarter of 2016, a change from previous years when the smartphone business was the main contributor.

Samsung did not provide a divisional breakdown. It will release detailed first-quarter results later this month. But analysts estimate operating profit from the semiconductor division hit a record Won6tn, and forecast that demand would continue to exceed supply throughout the year as the popularity of internet-connected devices continues to grow.

Analysts expect Samsung’s mobile division to have generated an operating profit of about Won2tn ($1.8bn) in the first quarter after the company suffered more than $5.3bn losses last year due to the withdrawal of the Note 7.

Samsung is now counting on the new Galaxy S8 smartphone, which goes on sale on April 21, to help salve its bruised image. “We are very positive about the new phone. It will give a big boost to Samsung’s earnings from the second quarter,” said IBK’s Mr Lee.

Analysts say the S8 flagship smartphone, launched in New York late last month, should help Samsung regain its global market leadership after the South Korean company was edged out of the top spot by Apple in the fourth quarter of last year. The new phone, featuring an improved design and many upgraded features, is expected to outsell its predecessor S7 device, which shipped 48.5m units in its first year.

“There isn’t any significant rival from the Android side in the premium segment and we see strong pent-up demand for a new Samsung device,” said Kim Young-woo, analyst at SK Securities.

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