Samsung Electronics Profit Jumps to Record on Chips
Profit at Samsung’s semiconductor division jumped to 2.94 trillion won from 340 billion won a year earlier. Photographer: Jean Chung/Bloomberg
July 30 (Bloomberg) -- Bloomberg's Jon Erlichman reports on the latest breaking news and top stories in today's Business Briefs. (Source: Bloomberg)
Samsung Electronics Co., Asia’s biggest maker of semiconductors, flat screens and mobile phones, said second-quarter profit jumped 83 percent to a record, fueled by a recovery in demand for computer-memory chips.
Net income climbed to 4.28 trillion won ($3.6 billion) from 2.33 trillion won a year earlier, the Suwon, South Korea-based company said today. Profit exceeded the 4.15 trillion won average of 11 analyst estimates compiled by Bloomberg. Sales rose 17 percent.
Samsung joined Intel Corp., Apple Inc. and Hynix Semiconductor Inc. in posting higher earnings for the latest quarter after prices increased. The electronics maker said it will be a “challenge” to sustain current profitability as competition increases in televisions and mobile phones.
“Concern about demand in overall tech products has increased greatly recently,” said Lee Jin Woo, a fund manager with KTB Asset Management Co., which manages $9.3 billion in assets in Seoul. “Although it needs to be seen whether actual demand for tech products will cool off fast, such uncertainty will affect sentiment in the short term.”
Samsung fell 2.1 percent to close at 810,000 won in Seoul trading, while the benchmark Kospi index lost 0.7 percent.
Operating profit, or sales minus the cost of goods sold and administrative expenses, surged 88 percent to a record 5 trillion won, in line with the preliminary estimate the company gave on July 7.
‘Difficult Market Conditions’
“With intensified competition throughout the digital media and mobile industries going forward, it may become a challenge to maintain current profitability levels,” Robert Yi, vice president of investor relations at Samsung, said in an e-mail.
Strong seasonal demand for components will drive Samsung’s performance in the third quarter amid increased market supply, Samsung said in the statement. Falling TV prices may erode profit margins in the third quarter, it said.
Profit at Samsung’s semiconductor division jumped to 2.94 trillion won from 340 billion won a year earlier. Micron Technology Inc. and Hynix, which compete against Samsung in computer memory, both reported quarterly profit compared with losses a year earlier.
Intel, the biggest chipmaker, this month reported record second-quarter sales and topped analysts’ estimates with its forecast for the current period. Corporate spending is strengthening, it said, signaling that the economy isn’t headed back into recession.
Chip Prices
The price of the benchmark 1-gigabit DRAM chip rose 31 percent in the 12 months to July 29, according to Taipei-based Dramexchange Technology Inc., operator of Asia’s largest spot market for semiconductors.
Prices will decline “slightly” in the current quarter, while overall personal-computer demand will be stronger in the second half than in the first six months of the year, Kim Jeong Woo, a marketing executive at Hynix, said last week.
Samsung will maintain its “cost leadership and record strong earnings” for the second half, Jae H. Lee, an analyst with Daiwa Capital Markets, said in a July 26 report.
Samsung’s capital expenditure for this year may exceed a previous projection, with additional investment in new businesses including organic light-emitting devices, or OLEDs, Yi, the investor relations vice president, said today in a teleconference.
Capital Spending
The chipmaker in May said it plans record capital spending of 18 trillion won for this year to widen its lead in the memory-chip and flat-screen industries. Spending reached 9.2 trillion won in the first half, representing 51 percent of the planned total, it said today.
At its liquid-crystal display business, profit more than tripled to 880 billion won, driven by higher TV demand. LG Display Co., the world’s second-largest LCD maker after Samsung, last week said second-quarter operating profit doubled, while it missed its target for shipment growth in the quarter.
Panel prices may drop as concern a global economic recovery will slow prompted some clients to adjust inventories, LG Display said last week. The company may cut output in August to prevent panel prices from falling sharply, Chief Executive Officer Kwon Young Soo told reporters on July 23.
Profit at Samsung’s digital media division, which makes TVs, tumbled 69 percent to 360 billion won.
LCD TVs
Global shipments of LCD TVs may rise 24 percent to more than 180 million units in 2010, Austin, Texas-based DisplaySearch said in March. Samsung, the world’s largest TV maker, said in January it expects to sell 35 million LCD sets this year.
Samsung, also the world’s second-largest maker of mobile phones, said profit from the telecommunications division fell 36 percent to 630 billion won as the company lagged behind Apple and BlackBerry-maker Research In Motion Ltd. in the smartphone market. Second-quarter handset shipments climbed 22 percent to 63.8 million year on year, Samsung said. The division’s profit margin dropped 3.6 percentage points to 7.2 percent on a yearly basis, it said.
Nokia Oyj, the world’s biggest maker of mobile phones, last week posted a steeper-than-expected 40 percent drop in net income on competition from Apple’s iPhone, while LG Electronics Inc. this week reported a record quarterly loss from its handset business. Apple last week said net income leaped 78 percent in the third quarter and forecast fourth-quarter sales that topped analysts’ estimates.
Worldwide sales of smartphones will increase 36 percent to 247 million in 2010 and expand 30 percent next year, El Segundo, California-based research company Isuppli said in April.
Samsung aims to more than double its share of the smartphone market, helped by the introduction of the Galaxy S model, Lee Donjoo, senior vice president of the company’s Mobile Communications Division, said on June 21.
To contact the reporter on this story: Sungwoo Park in Seoul at spark47@bloomberg.net.
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