By Kim Yoo-chul
Samsung Electronics is set to further surge throughout the remainder of this year in terms of profit on the bullish outlook of smartphones and strengthening views that chip prices have already hit the bottom.
One noticeable thing is the world’s biggest chipmaker is benefiting from requests by the iPhone maker Apple to supply more operating mobile chips.
Samsung and the California-based Apple are in patent disputes over wireless telecom- and design-related technologies used in tablets and smartphones, with court cases still pending in Milan and Sydney and Australia.
Despite the deepening legal tussle with Samsung, Apple has agreed with Samsung to use Samsung chips in its next iPhones and iPads because Samsung is the sole company among other chip companies to guarantee output commitment, price and on-time delivery, according to Samsung executives.
Samsung is ramping production of the so-called A6 chips for Apple _ a confirmation of Apple’s steady reliance on Samsung’s foundry operation.
The Korea Times earlier exclusively reported business talks between the two sides and Samsung chief operating officer (COO) Lee Jae-yong admitted that the supply contracts with Apple will be maintained until next year and talks with Apple CEO Tim Cook included ways of supplying better parts in 2013 and 2014.
``It’s true that Samsung has been producing more application processors (APs) to our customers and the estimated portion of APs within our entire non-memory business was 50 percent,’’ said Kim Myung-gon, a senior executive at Samsung, in a conference call to institutional investors and analysts, Friday.
``Samsung will start the production of mobile APs by applying a finer 32-nanometer class processing tech. Also, we are in the phase to develop advanced mobile APs by using even more advanced technologies. Samsung is also in step to develop quad-core mobile APs,’’ said the Samsung executive.
Samsung is selling parts, including the key A4 and A5 processor chips, for Apple’s iPhones and iPads and Samsung officials say there is no doubt that Samsung will remain a main supplier of A6 chips.
Samsung is planning to invest more for its mobile AP-producing factory in Austin, Texas, to meet the rising such demand. Some $1.2 billion has been set for expansion of its Austin factory.
``Samsung is dealing the patent issue, separately. It’s good for us to sell more of our processor chips and flat-screens to key customers including Apple despite the legal issue,’’ said another Samsung source who asked not to be identified.
He said the upcoming iPhone, tablets and Samsung-made smartphones will lift the demand for such profitable chips, helping Samsung create more earnings from its bread-and-butter semiconductor business.
Apple is the biggest client for Samsung, buying 9 trillion won worth of components such as memory chips and flat-screens.
During the conference call, Samsung said it will ``significantly’’ increase its investments for brighter AM-OLED displays used in its Galaxy smartphones and the updated plan comes after the South Korean tech giant overtook Apple in the third quarter to become the world’s biggest smartphone maker amid the legal battle with its U.S.-based corporate foe and friend.
Samsung has painted a lucrative business outlook for the current quarter as it believes the demand for consumer electronics devices will peak on the approaching year-end shopping season.
``Chip prices have hit the bottom and Samsung also expects sales of mobile devices to remain strong and even for flat-screen television shipments to rise,’’ it said.
Samsung’s investor relations chief Robert Yi said in the call that he is ``cautiously optimistic’’ on the fourth quarter outlook at this point.
In the third quarter, Samsung reported a 4.25 trillion won in operating profit, which analysts say is quite impressive among other technology majors in this planet.
The result is based on a consolidated basis _ an international accounting measurement that include Samsung’s all overseas performances.
The company’s vice president of mobile communications Kim Hwan dismissed worries over the negative impact of Amazon’s Kindle Fire tablet on Samsung’s tablet business. ``Kindle Fire is only targeting consumers in the United States. Samsung has more product lineups with various screen sizes. Our target is for customers in the global market.’’
Samsung forecasts the demand for personal computers to remain weak in the fourth quarter due to weak seasonality. But that’s not enough to threaten Samsung’s bottom line in profit as the soaring demand for smartphones and tablets will offset.
``Samsung will try to expand our customer base in profitable OLED displays and we will further expand the market gap with rivals. In LCDs, the company will cut more costs to overcome the current difficult situations,’’ said Lee Jeong-yeol, a senior vice president of its display-producing division, in an answer from analysts in the call.
Samsung’s display-making division extended its operating loss for a third straight quarter hit by weaker panel prices amid uncertainties in major economies.
``Our `fast-follower’ strategy does work because we have dual strengths in finished goods and parts, in addition to speedy decision-making. We will be more aggressive in the legal battle with Apple, however, while being aggressive in manufacturing high-quality components to our customers.’’