[Newsmaker] Samsung set to become world’s most profitable company

Samsung Electronics is set to report its best-ever quarterly profit in the second quarter, higher than that of Apple, the world’s most profitable company.

The South Korean electronics giant estimated Friday that it posted 60 trillion won ($51 billion) in sales and 14 trillion won in operating profit in the April-June period, which are increases of 17.79 percent and 71.99 percent, respectively, from the previous year.

This could be the first time that the world’s largest smartphone maker has recorded higher quarterly operating profit than Apple, which is estimated to post an operating profit of 12.3 trillion won in the quarter.

Samsung’s record-high earnings are mainly buoyed by the booming chip market amid rising demand for storage products, according to analysts. 

Samsung’s chip unit is predicted to post 17.5 trillion won in sales and 7 trillion won in operating profit, accounting for more than half of the firm’s total operating profit. This could also be the first time that Samsung beats the world’s largest chipmaker Intel, which is predicted to post 16.4 trillion won in the second quarter.

Chung Chang-won, an analyst at Nomura Securities, said, “The memory chip (Samsung’s key product) market has more significantly grown than central processing units (Intel’s key product) market in the mobile era, where demand for DRAM and solid-state drive is rising.”

Earlier this week, Samsung announced plans to invest $18 billion to expand and upgrade its chip plants in Korea, with the aim of extending its lead in the market.

Samsung’s earnings are also driven by strong sales of its smartphones including the new flagship Galaxy S8 alongside budget models. 

Analysts predicted the firm’s IT and mobile communications unit would post 3.7 trillion won in the second quarter. Although the profit falls short of the operating profit of 4.3 trillion won a year earlier, this is a significant recovery after plunging to 100 billion won in the third quarter of last year due to the discontinued sales of the Note 7 in October. 

Samsung’s premium smartphone Galaxy S8, which was launched in April, sold more than 10 million units in the first month, the largest among its Galaxy series. Sales are also predicted to reach 20 million units in the second quarter, industry watchers predicted.

“Samsung’s IM unit appears to have shipped a total of 80 million units in the second quarter, with shipments of the Galaxy S8 hovering around 20 million units. The operating profit in the second quarter is estimated to jump 93 percent from the previous quarter,” said Song Myong-sub, an analyst at HI Investment & Securities.

In other segments, analysts forecast 1.5 trillion won for its display unit and 800 billion won for consumer electronics.  

Samsung is also predicted to post record-breaking sales in the coming quarters on continued strong demand for chips and new organic light-emitting diode supply to Apple’s new smartphone iPhone 8.

“Samsung is predicted to post an operating profit of 15.2 trillion won in the third quarter due to the continued rising prices of chips and the new OLED supply deal with Apple,” said Noh Geun-chang, an analyst at HMC Investment Securities.

Meanwhile, Samsung’s quarterly revenue is larger than the total gross domestic product of North Korea, whose gross domestic product in 2015 was estimated at around 46 trillion won, local reports said quoting recent data released by the US Central Intelligence Agency.

When calculated based on daily performance, Samsung earned 6.3 billion won per hour from April to June. The company also saw its best-ever operating profit margin of 23.3 percent, a rise from 16 percent a year earlier. This means the firm earns 23.3 won after selling a product at 100 won, according to experts.

By Shin Ji-hye (shinjh@heraldcorp.com)