Investors may be cheering a revival in Samsung Electronics Co.'s handset business, but it wasn't smartphones that drove earnings in the second quarter.
Rather, it was the South Korean company's extraordinary dominance in memory chips that accounted for the lion's share of growth in both revenue and operating profit for the period. Almost 80 percent of sales in the semiconductor business came from memory; the chip business made up 91 percent of the increase in operating earnings.
While strength in mobile handset sales indicates last year's battery crisis is behind it, Samsung's fortunes now are uncomfortably tied to a cyclical business that is leveraged to revenue. That makes the company a massive winner when demand and prices are strong, but exposes its P&L when the good times end.
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