Comms chips

Samsung's Chip Shop Fuels Q3 Profit Growth

South Korea's Samsung Electronics estimates operating profits grew by nearly 18% in its recent third quarter, compared with the same period last year, and that sales were up nearly 5%.

Yet to publish more detailed results, the tech giant said it was expecting operating profits of 17.4-17.6 trillion South Korean won ($13.4-13.5 billion), on revenues of KRW64-66 trillion ($49.3-50.8 billion), for the July-to-September quarter.

The company's statement offered no other information about its recent financial performance, but the sharp increase in profitability points to another strong quarter for the memory chips business.

Samsung Electronics Co. Ltd. (Korea: SEC)'s chips business has traditionally accounted for about four fifths of its operating profits.

The latest estimates are also an improvement on Samsung's results in the second quarter of the year, when an operating profit of about KRW14.9 trillion ($11.4 billion) marked its first-ever sequential decline.

Sales of the flagship Galaxy 9 smartphone were lower than expected in the second quarter, and Samsung now faces stiff competition from handset rivals at the luxury end of the market, including iPhone maker Apple Inc. (Nasdaq: AAPL), as well as lower-cost Chinese manufacturers.

The emergence of China's Huawei Technologies Co. Ltd. as a major force in the smartphone sector has also put pressure on Samsung and other device makers. Last year, Huawei recorded a 32% increase in device sales, to about 237.2 billion Chinese yuan ($30 billion). (See Huawei Dwarfs Ericsson, Nokia on R&D Spend in 2017.)

Nevertheless, analysts have sounded concern about the current lack of innovation in the smartphone industry. The latest models from some leading manufacturers, they say, do not come with many radical new features. Moreover, in some markets, consumers already appear to have taken note and stopped replacing their devices as often as they previously did.

For all the latest news from the wireless networking and services sector, check out our dedicated mobile content channel here on Light Reading.

Samsung released estimates several weeks after announcing plans to invest about $22.3 billion into artificial intelligence (AI), 5G and other new technologies over the next three years in a bid for tech-sector leadership. (See Samsung to Pump $22.3B Into AI, 5G, New Tech, 5G Will Arrive in South Korea in March 2019 and No 5G Deal: Huawei Misses Out at SKT.)

The South Korean firm, which had 320,671 employees globally in December last year, aims to increase its number of AI researchers to 1,000 as part of the investment plan.

It has also promised to channel more spending into its manufacturing hubs, including a facility in Pyeontaek, and to increase investments in the production of memory chips, non-memory equipment and advanced manufacturing equipment.

The announcement seemed aimed at addressing some investor concern over a lack of strategic direction at Samsung ever since the conviction of group heir Jay Lee on bribery charges last year: He continues to appeal that conviction, according to press reports. (See Samsung Boss Gets 5 Years in Scandal Trial .)

Samsung's share price has fallen by 12.4% in South Korea since the start of this year.

— Iain Morris, International Editor, Light Reading

Be the first to post a comment regarding this story.
Sign In