Samsung Q3 earnings tumble 30% on Note woes

[THE INVESTOR] Samsung Electronics said on Oct. 27 its third-quarter earnings tumbled 29.7 percent from a year ago, hit hard by the ongoing recall of the fire-prone Galaxy Note 7 smartphone whose sales and production were stopped this month due to safety concerns.

The Korean tech giant said its operating profit for the July-September period stood at 5.2 trillion won ($4.6 billion), compared with its earnings of 7.3 trillion won a year ago.

Revenue also fell 7.4 percent to 47.8 trillion won. 

Financial losses from the discontinued Note phone caused the flagship mobile business division to suffer its smallest quarterly profit of 100 billion won since the launch of its Galaxy S series phone six years ago.

But the company said its smartphone shipments remained solid due to stable sales of its flagship Galaxy S7 and its Edge variant phones. In the third quarter, the company sold almost 89 million phones, with smartphones making up 80 percent.

Despite the Note fallout, Samsung’s parts sales drove up the company’s earnings overall.

The company pledged to increase investments to beef up production of semiconductors and displays, with a record 27 trillion won of investments this year alone.

The company said 13.2 trillion won will be injected to ramp up production of V-NAND flash memory chips, which are mainly used for large-scale data centers or business servers, and to upgrade other chip production facilities overall.

Another 10.9 trillion won will be used for flexible organic light-emitting diode displays, which has seen demand soaring recently as more handset makers, including Apple, are bracing for its adoption in their next high-end models. Samsung dominates almost 97 percent of the OLED market for mobile devices.

“In the fourth quarter, strong demand for NAND is expected to continue thanks to the expanded adoption of SSD (solid state drive) in all segments and the growing need for high-density chips for mobile devices,” the company said. 

By Lee Ji-yoon (jylee@heraldcorp.com)