By Kang Seung-woo
Samsung Electronics reported a record operating profit of 14.07 trillion won ($12.6 billion) in the second quarter Thursday on strong demand for memory chips and expanding sales of its flagship smartphones.
The tech giant also renewed all-time highs in its quarterly sales and net profit, posting 61 trillion won and 11.05 trillion won, respectively.
Analysts say Samsung is on pace to surpass 50 trillion won in its full-year operating profit for the first time.
The record operating profit is up 72.7 percent from 8.14 trillion won a year ago and is also a 42 percent increase from the previous quarter’s 9.9 trillion won. Samsung’s previous record operating profit was 10.16 trillion won in the third quarter of 2013.
Amid the memory chip “super cycle,” its chip business was the key driver behind the record earnings as its profit amounted to 8.03 trillion won, eclipsing its previous record of 6.3 trillion won. Its operating profit margin stood at 43 percent.
“The memory business achieved solid earnings growth in the quarter thanks to continued strong demand for high-density server DRAMs and solid state disks, despite weaker seasonal demand for mobile phones. Limited supply conditions also remained in the industry, which allowed for favorable supply and demand conditions, and prices,” a Samsung official said.
Samsung, the world’s largest DRAM and NAND flash maker, is expected to continue its strong performance in the chip business in the second half of the year as conditions in the market are likely to remain favorable. The former are used for computers while the latter is for mobile devices such as smartphones.
“The operating profit from the semiconductor division is expected to reach 9.5 trillion won in the third quarter and 10 trillion won in the final quarter,” said Kiwoom Securities analyst Pak Yu-ak.
According to industry tracker IC Insights, sales of both DRAM and NAND are expected to set record highs this year as the annual growth rate of the DRAM average selling price is forecast to be 63 percent and that of NAND flash is forecast to increase 33 percent.
The mobile business delivered an earnings surprise as it reported 4.06 trillion won on the back of the strong sales of the Galaxy S8 and S8 Plus smartphones. It marked the first time for the mobile division’s operating profit to surpass 4 trillion won since the second quarter of 2016, when it registered 4.32 trillion won.
According to the world’s largest smartphone maker, the latest high-end handsets have outsold its predecessors in almost all regions thanks to their enhanced features, including the Bixby voice assistant.
Market watchers believe that Samsung’s mobile business is likely to come up with better performance in the latter half as the Galaxy Note 8 is expected to contribute to it. Samsung is scheduled to unveil the new jumbo phone on Aug. 23 in New York.
The consumer electronics business posted an operating profit of 320 billion won, down from 1 trillion won posted a year earlier, with the company maintaining its lead in the premium TV sector. Price changes in panels, however, led to weakened profitability.
Also, Samsung announced it invested 12.7 trillion won in facilities in the April-June period including 7.5 trillion won for the semiconductor business and 4.5 trillion won for the display segment. Samsung’s first-half expenditure has reached 22.5 trillion won, coming closer to 25.5 trillion won spent through last year.
On its strong performances, there are growing expectations that Samsung’s 2017 operating profit may top 50 trillion won.
“The boom in the semiconductor sector along with its competiveness in display business will help Samsung register 15 trillion won in its third-quarter operating profit,” said Dongbu Securities analyst Kwon Seong-ryul. He forecast that its full-year operating profit could reach 53 trillion won.
Meanwhile, the company said it will also roll out a cash dividend worth 7,000 won per share. The combined amount is estimated at 965 billion won.