Economy, Sci & Tech

Samsung Profits Up Despite Phone Fires

Samsung’s profits did better than many analysts expected.Samsung’s profits did better than many analysts expected.

South Korea’s Samsung Electronics Company’s third-quarter profit grew 5.6%, beating estimates, as a pickup in chip and display earnings likely offset the impact of a global smartphone recall that has roiled the tech giant.

The world’s biggest smartphone maker said in a brief filing on Friday its operating profit for July-September was likely 7.8 trillion won ($7 billion), compared with the 7.4-trillion-won tipped by a Thomson Reuters StarMine SmartEstimate of analysts’ forecasts. A year earlier operating profit was 7.4 trillion won.

The firm won’t issue full results until late October and gave no details on the cost of recalling about 2.5 million Galaxy Note 7 phones after batteries caught fire.

Analysts have said the Note 7 woes—rumbling on with Wednesday reports of a smoking battery in a replacement device—could have undercut mobile earnings by at least 1 trillion won.

Revenue for the quarter likely fell 5.2% to 49 trillion won, the South Korean firm said, less than the Thomson Reuters StarMine SmartEstimate of 51.1 trillion won.

Samsung’s semiconductor business, the world’s top memory chipmaker, is thriving as Apple Inc and peers boost the global market, seeking chips for new iPhones and other products launched ahead of the peak yearend sales season.

Germany’s Dialog Semiconductor, an iPhone chip supplier, said on Thursday its revenue beat expectations.

 Note 7 Chip Boost?

Ironically, the Note 7 problems could also boost Samsung’s chip business. Industry executives say the sudden need for chips in 2.5 million replacement phones is exacerbating already tight memory market conditions, which could push prices higher.

Paul Romano, chief operating officer at US-based electronic component distributor Fusion Worldwide, said the firm’s clients, which include Samsung, are currently having a harder time procuring memory chips.

“Some smartphone makers are also trying to secure more of the chips as they see an opportunity for capitalizing on Samsung’s missteps and boost handset sales,” he added.

“Sometimes this creates a seize mentality–everyone tries to manage the risk,” said Romano. “Often the response is to procure new product, trying to grab what’s left of a shrinking pile of supply.”

Researcher TrendForce says contract prices for DRAM chips—used in temporary data usage—will rise by more than 10% in Oct.-Dec. Demand is outpacing supply in the market for NAND chips used for long-term data storage during the third quarter, the researcher added, tipping prices to continue rising.

The stock touched a record high of 1.716 million won on Thursday after Samsung said it was “carefully reviewing” the proposals by activist investor Elliott Management for a radical corporate makeover that would split Samsung Electronics into a holding vehicle for ownership purposes and a separate operating company.


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