Samsung reaps record profit

Smartphones account for 70% of total earnings

By Kim Yoo-chul

Samsung Electronics has reported record quarterly profits driven by bullish sales of its Galaxy devices and a major turnaround of its unlisted display-making business.

The company said Friday that its operating profit during the July-September period reached 8.12 trillion won, up 91 percent from a year earlier. Its quarterly revenue rose to a record high 52.18 trillion won, an increase of 26 percent from year earlier.

``Hit by steady price falls, our chip-making business reported less profit than expected. But the continued stronger sales of our mobile devices and the steady growth of organic light-emitting diode (OLED) displays have helped secure the bottom line,’’ said Samsung.

Its mobile division has already emerged as the major cash-generator replacing the decades-long traditional areas of semiconductor and displays. The division reported 5.63 trillion won in quarterly operating profit, accounting for 70 percent of the company’s quarterly operating profit.

Samsung’s quarterly report is based on an international accounting measurement that includes the firm’s overseas performances.

Market research firms and Samsung officials said the sale of its Galaxy S3 smartphones, released in May, will reach over 30 million by the end of this year.

In September, Samsung launched the Galaxy Note 2 phablet, which also runs on Google’s Android software and has a 5.5-inch screen, larger than its predecessor’s and comes with a stylus.

``Our Galaxy S3 smartphones will continue the ongoing bullish moves in terms of sales and also the Galaxy Note 2 will be far better than the Note 1 in terms of sales,’’ said Kim Hyun-joon, vice president of the company’s mobile division, in a conference call.

Samsung said the weakening of the euro and currencies in major emerging markets caused it 570 billion won in losses. By the third quarter, the company’s cash-equivalent assets were 30.03 trillion won, it said.

The company invested 4.5 trillion won in facilities with its chip-making business spending 2.1 trillion won while its display business spent 1.1 trillion won. For the first nine months of this year, the Suwon-based outfit spent 18.5 trillion won on facilities.

But Samsung’s parts-making businesses are seeing signs of solid recovery after its display-making affiliate reported 1.09 trillion won operating profit during the last quarter. It is the first time it has broken the 1 trillion won mark in three years.

Its display-making business reported 1.2 trillion won in the third quarter of 2009. ``Samsung’s display business is recovering as the operating profit was far better than our expectations. The firm’s increased buying of parts is helping its component businesses get stronger,’’ said Korea Investment analyst Seo Won-suk,.

During the conference call, Samsung said it has begun selling logic chips using a finer 28-nanometer processing technology. As part of a strategy to cut its reliance on the volatile and cyclical memory chip business, the firm has been investing more in profitable logic chip business.

Samsung has also vowed to further strengthen its conventionally-strong memory chip business by planning to mass produce advanced flash memory chips using a finer 10-nanometer technology this year.

``The recent acquisition of Japan’s Elpida Memory by Micron Technology of the United States won’t threaten us as Samsung is the market leader in mobile DRAMs and server DRAMs. No negative impact is foreseen even after the new unit launches,’’ said Kim Myung-kun, a senior executive at Samsung’s investor relations team, during the call.