Samsung Electronics shows resilience

A Samsung Electronics researcher takes a look at a semiconductor chip manufactured at the firm’s factory in Hwasung, Gyeonggi Province. Analysts said Monday the firm’s semiconductor division is expected to help underpin its profitability in the fourth quarter, backed by strong memory chip prices. / Korea Times file

Tech giant expected to chalk up almost W9 trillion in 4Q profit

By Kim Tae-gyu

Samsung Electronics is expected to rack up a handsome profit of almost 9 trillion won over the fourth quarter, demonstrating a major turnaround from the disappointing third quarter performance due to the Galaxy Note 7 debacle.

Market observers said Monday that Samsung’s conventional breadwinner of the semiconductor segment would underpin the profitability of the world’s leading memory chipmaker.

IBK Securities projected that Samsung’s fourth-quarter operating profit would amount to 8.7 trillion won with around half of it coming from the semiconductor sector boosted by strong memory chip prices.

HMC Investment Securities recently increased its previous estimate by around 10 percent to come up with 8.7 trillion won, which would be the biggest quarterly profit in three years.

Other brokerages like Kium Securities and Hyundai Securities also predicted that the operating income would top 8.5 trillion won, which would mark a jump from 5.2 trillion won in the previous quarter.

“Samsung Electronics’ semiconductor division hit the jackpot in the fourth quarter and so did the display division. Consumer electronics also fared quite well,” said Nomura Securities senior analyst Chung Chang-won.

“Three pillars would buttress Samsung’s fourth-quarter profit and in case the mobile business gets back on track next year by dealing with the aftermath of the Note 7 fiasco, Samsung is likely to chalk up a record annual profit larger than the 40 trillion won in 2017.”

Originally, even optimistic experts thought that Samsung’s fourth-quarter profit would be less than 8 trillion won after the tech giant globally recalled the large-screen smartphone Note 7 in September due to reports of the phones catching fire while charging.

The unprecedented mishap cost Samsung Electronics trillions of won and the negative ripple effect caused by the damaged brand image was feared to continue through next year.

Worse, Samsung Electronics got embroiled in the corruption scandal involving President Park Geun-hye and her shadowy confidant Choi Soon-sil, who is accused of having illegitimately meddled in state affairs.

Along with other conglomerates, Samsung Electronics is suspected to have donated a substantial amount of money to foundations whose establishment and operation was spearheaded by Choi.

Yet, Samsung showed that it is immune to the effects of such political issues or past troubles with robust performances.

“Samsung Electronics’ competitiveness comes from its technological prowess and well-diversified business portfolio,” said IBK Securities research head Lee Jong-woo. “Hence, its performance is less vulnerable to outside impacts.”

Bright prospects for 2017

To further strengthen its business portfolio, Samsung Electronics has recently added a fresh revenue source through mergers and acquisitions ― it channeled $8 billion to acquire Harman International Industries last month.

The U.S. automotive parts supplier will help Samsung tap into such potential-laden areas as infotainment, connected car systems and telematics with large profits.

The biggest deal Samsung Electronics has ever made is set to be concluded midway through next year, adding a substantial amount of sales and profits to the world’s No. 1 smartphone manufacturer.

Harman is regarded as a new cash cow as its order backlog is estimated to be $24 billion, more than three times its yearly sales.

“Samsung’s prospects for 2017 are bright and it will benefit through the M&A with Harman,” a Seoul analyst said. “Its profitability will grow to a next level.”

On a more positive note, Samsung enjoys the depreciation of the Korean won against the dollar, which boosts the company’s price competitiveness in the offshore markets.

The won-dollar exchange rates have risen almost 10 percent during the past three months so that they fluctuate in the neighborhood of 1,200 won per dollar of late.

As incoming U.S. President Donald Trump vows to conduct a set of pump-priming measures, the chances are that the won will remain weak against the strengthened dollar next year, watchers point out.

That means that the dollar-denominated prices of made-in-Korea Samsung products would become cheaper which will attract more customers in international markets.