Samsung Electronics Co Ltd (005930. KS) said on Friday that its third-quarter operating profit will likely increase by 28% to the highest level in three years, owing to higher memory chip pricing and display sales for smartphone makers’ new flagship releases.
The world’s top memory chip and smartphone maker forecasted a profit of 15.8 trillion won ($13.3 billion) for July-September, slightly lower than the 16.1 trillion won Refinitiv SmartEstimate. Since the third quarter of 2018, this is the highest quarterly result.
“The mobile business’ operating margin might have been lower than the market expected,” said Park Sung-soon, an analyst at Cape Investment & Securities. “We will have to see marketing costs and what the mix of products Samsung sold was like.”
Analysts estimate that rising memory chip pricing and shipments, combined with increased profitability at Samsung’s chip contract manufacturing business, increased the chip division’s operational profit by around 79 percent from a year ago.
In the first half of the year, semiconductors accounted for roughly half of Samsung’s operating profit. Samsung shares were up 0.7 percent in the morning session after the company released preliminary earnings. It is expected to release specific financial results later this month.
The stock has dropped around 12% this year, compared to a 3% rise in the broader market (.KS11), weighed down by losses in September after U.S. peer Micron Technology Inc (MU.O) announced its memory chip shipments would shrink in the short term.
Analysts estimate Samsung’s current quarter operating profit to be similar to or slightly lower than the third quarter, citing expectations that prices for memory chips used in personal computers will fall from the fourth quarter as worldwide lockdowns ease, as well as a drop in smartphone shipments.
According to analysts, Samsung’s mobile company saw anticipated sales of 2 million new flagship smartphones in less than a month, indicating that demand for its foldable handsets had surpassed that of the previous year.
However, marketing charges and higher component costs due to the global chip scarcity certainly counteract this. Analysts believe Samsung’s display unit did well because key customer Apple Inc (AAPL.O) increased orders ahead of the iPhone 13 series’ arrival in late September.
