APRIL 27, 2018 – South Korean telecoms giant Samsung Electronics said Thursday its first-quarter net profits soared by more than half thanks to strong demand for memory chips and its latest high-end smartphone.
The world’s biggest maker of memory chips and the flagship subsidiary of the sprawling Samsung group has recovered from a series of setbacks to post record profits in recent quarters.
The global launch of its new flagship smartphone, the Galaxy S9, as well as strong demand for chips used for smartphones and cryptocurrency mining has contributed to the rise in profitability.
The firm faced an embarrassing global recall of the Galaxy Note 7 device over exploding batteries in 2016.
And last year its vice-chairman Lee Jae-yong, scion of Samsung’s founding family, was jailed for his part in the sprawling corruption scandal that brought down president Park Geun-hye.
He has since been released after some of his convictions were quashed on appeal, and the firm’s shareholders have seen its value soar.
Net profit for January-March rose 52 percent to 11.69 trillion won ($10.8 billion), up from 7.68 trillion won a year earlier, the company said in a statement.
Operating profit was a record 15.64 trillion won, in line with the estimate of 15.6 trillion won suggested in a preliminary guidance report earlier this month.
“The semiconductor business posted solid earnings — 11.55 trillion won in operating profit on a 20.78 trillion won revenue — on strong demand for memory chips,” the company said in a statement.
The semiconductor performance was driven by demand for memory chipsets for high-value-added servers and graphics products.
Traders cheered the news, with Samsung shares closing up 3.45 percent at 2.61 million won.
“As has been expected, the semiconductor sector and the smartphone business performed well,” Greg Roh from HMC Investment & Securities told AFP.
In the next quarter, profitability in the smartphone sector will weaken but semiconductor demand will continue to boom, added Roh.
“Therefore, its overall business performance will be about the same as the first quarter,” said the analyst, projecting a 15.5 trillion won operating profit.
With the display segment likely to benefit from demand for new products to be rolled out, operating profit is likely to improve in the third quarter, reaching 17.4 trillion won, he said.
Total sales grew 19.8 percent to 60.56 trillion won and Samsung said it expected the memory business to maintain its strong performance in the second quarter.
But the firm warned that generating overall earnings growth across the company would be a challenge due to weakness in the display panel segment and increasing competition in the mobile sector.
First-quarter operating margin was 25.8 percent, up 6.2 percentage points year on year.
Trading of shares in the South Korean tech behemoth will be suspended for three business days starting Monday for a 50-1 stock split, under which their face value will be lowered from 5,000 won to 100 won.
Trading will resume on Friday, the Korea Exchange said.
