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Wed, May 18, 2022 | 05:48
Tech
S7, semiconductors to lift Samsung profits in Q2
Posted : 2016-05-30 17:08
Updated : 2016-05-30 17:47
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By Kim Yoo-chul

Solid sales of Samsung Galaxy S7 and demand for flash memory chips will offset the effects of a downturn in DRAM memory chips, boosting Samsung Electronics in the second quarter of this year.

"Samsung Electronics is expected to report its second quarter profits above market expectations due to good sales of the S7, improvements to its flash memory chip business and lower Smartphone inventory," said Shinhan Investment in a report, Monday.

The local brokerage expects Samsung Electronics to reap more than 7 trillion won in operating profits during the April-June period.

If the electronics giant breaks the 7 trillion won level in quarterly operating profits, it will be a first in nine months since the firm reported 7.39 trillion won in the third quarter of last year.

"Operating profits of Samsung's mobile business during the latest quarter will reach 3.6 trillion won, up 12.4 percent, year-on-year. Samsung is forecast to have shipped more than 14 million S7 smartphones for the three-month period ended June 30, up 40 percent a quarter earlier," said So Hyun-chul at Shinhan in the report.

Samsung has recently been aggressive on sales of the S7 in its key target markets, launching campaigns such as its "one plus one" event, in which consumers buy one S7 and get another free.

Such view is in line with Samsung officials who have said smartphone margins will be higher than the previous quarter as low-end smartphones such as Galaxy A and Galaxy J models are contributing more in profits.

Shinhan said the production yields for 48 layers of 3D flash memory chips have been improving, significantly, helping its device solutions unit to reap increased profits.

"Samsung's device solutions unit, which mainly handles the memory chip business, is expected to report 2.6 trillion won in operating profits," So said. "We believe display results will turn to the black."

Alongside Shinhan, Korea Investment, Mirae Asset-Daewoo, LIG Investment, E-Best Investment and Eugene Investment all expect Samsung to report an operating profit of over 7 trillion won in the current quarter.

E-Best and LIG, which earlier both presented a 5 trillion won level of guidance in profits, revised their estimates upwards to 7.19 trillion won and 7.06 trillion won.

"The correction is due to strong S7 traction," LIG Investment analyst Shin Hyun-joon said, adding their checks on Samsung's memory chip business have shown that a weak DRAM price won't deteriorate its semiconductor business much.

"Looking forward to 2016, estimates will need to come down for the DRAM chip business as Samsung's DRAM operating profit margins will likely drift further down," said Bernstein Research. "Margins in the flash memory chips, on the other hand, are trending better than expected. Despite the strong handset performance, we believe Samsung will struggle to increase operating margins, year-on-year, for the handset division this year."

Like smartphones, Samsung is the world's top supplier in DRAM chips, the components to be used in writing and reading the data in digital devices, with its global share reaching over 45 percent. In the flash memory chip market, Samsung is also the frontrunner ahead of its chief Japanese rivals.

"The consumer electronics division should perform very well in 2016 due to the Olympics, but the division is too small to move the needle," Bernstein added. "Display numbers are likely to be pressured due to pricing headwinds."


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