Samsung Electronics forecast it posted 9.9 trillion won ($8.7 billion) in operating income in the first quarter, recording a nearly 50 percent on-year jump.
Beating market expectations, the Korean tech giant estimated Friday it posted 50 trillion won in sales and 9.9 trillion won in operating income, 0.44 percent and 48.2 percent rises on-year. The operating profit is the second-highest profit total since the company recorded 10 trillion won in the third quarter of 2013.
The earnings surprise was driven by the company’s chip unit, which is expected to record more than 6 trillion won in operating profit taking advantage of favorable market conditions. The figure is much higher than the chip unit’s record-breaking operating income of 4.9 trillion won in the fourth quarter of last year.
The global chip market has been favorable in recent years due to the rising price and demand for DRAM and NAND flash. While supply growth slows due to the difficulties of acquiring high-level chip production technologies, demand for high-performance smartphones and personal computers has continued to grow.
According to market research firm TrendForce, the contract price of 64-gigabyte NAND Flash has continued to rise by around 9 percent during the last three months.
Daishin Securities’ analyst Kim Kyung-min said, “Samsung’s chip profits in the second quarter will rise further as the contract price and demand are expected to continue to rise.”
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As to Samsung’s smartphone unit, its traditional cash cow, is estimated to post around 2 trillion won -- about half from the previous year -- due to the delayed launch of its flagship smartphone Galaxy S8.
Samsung, which traditionally unveiled the Galaxy S series in March to fill the offseason, launched no new smartphone in the first quarter, as the company delayed launching the Galaxy S8 to April in wake of the battery explosion of the Note 7.
Analysts predicted the smartphone unit will recover in the following quarter when its flagship smartphone Galaxy S8 is rolled out, predicting operating income will post 3.5 trillion won.
“Considering the favorable market response of the Galaxy S8, sales will be a similar level to its predecessor Galaxy S7, which sold a record-breaking 48.5 million units,” said Lee Seung-woo, an analyst at IBK Investment & Securities.
“In the second quarter, Samsung is expected to post 12 trillion won in operating income driven by strong sales of Galaxy S8,” Lee added.
Meanwhile, Samsung’s smaller rival LG Electronics is expected to post the second-highest profit in the first quarter due to stable performances in home appliances and smartphones.
LG estimated on the same day it posted 14.6 trillion won in sales and 9.2 trillion won in operating profit, 9.7 percent and 82.4 percent rises on-year, respectively.
LG’s smartphone unit, which had posted 1.2 trillion won in operating losses last year, is estimated to reduce its losses this year after streamlining its personnel and business in 2016.
By Shin Ji-hye (
shinjh@heraldcorp.com)
