Samsung Beats Estimates On Strong Smartphone Demand

Samsung Electronics Co. posted earnings that handily beat analyst estimates as stronger smartphone demand offset price declines in the memory chip business.

Operating income was 7.7 trillion won ($6.4 billion) in the three months ended September, compared with the 6.97 trillion won analysts had forecast, according to estimates compiled by Bloomberg. Still, that is a profit decline of more than 50% for the Suwon, South Korea-based company.

Samsung, the world’s largest producer of mobile phones and smartphone displays, is benefitting from solid demand for its Note 10 and for Apple Inc.’s iPhone 11 Pro, which uses the company’s OLED displays. Yet, the memory chip business has been its most profitable and uncertainties there have lingered because of the ongoing US-China trade war and Japanese restrictions on the export of materials essential for chip and display production.

“It’s better-than-expected results as mobile business made a huge improvement,” said Park Sung-soon, analyst at Cape Investment & Securities.

Shares rose as much as 1.4% and had climbed 23% this year through Monday’s close.

Sales for the third quarter were 62 trillion won, beating the average projection of 61.14 trillion won compiled by Bloomberg.

Samsung won’t provide net income or break out divisional performance until it releases final results later this month.

Samsung’s new high-end smartphones, including the Galaxy Note 10 and Galaxy Fold, helped cushion profit declines in the memory business. Its display business is recovering from a slump, with strong demand for OLED displays for smartphones such as Apple’s iPhone 11.

The volatile business environment due to the US-China trade war and South Korea-Japan spat has fuelled uncertainties and made it harder for the market to gauge demand. As Japan’s export curbs on key materials used in chips and display production kicked in early July, clients raised their inventories of memory components to minimize risk, according to a note from TrendForce on 26 September.

“The stock-up demand was stronger than expected this third quarter due to the seasonal tailwinds and the pulling forward of end product shipments ahead of a possible new round of US tariff increases in December,” said TrendForce. “Consequently, the overall trend of contract prices also shifted from decline to stability during the third quarter.”

Meanwhile, Samsung Electronics Co.’s de facto leader, Jay Y. Lee, plans to give up his board seat after his directorship expires late October as he prepares for another trial over alleged bribery, a person familiar with the matter said.

The billionaire heir won’t seek to extend his three-year term on the board of the tech behemoth when it ends 26 October, but will remain at the helm of the world’s largest chip and smartphone maker, the person said, asking not to be named because of the sensitivity of the issue. Lee will instead continue to run Samsung Electronics with the title of vice chairman though its board will stay central to overall management, the person added.

The 51-year-old is putting some distance between himself and Korea’s largest conglomerate ahead of a re-trial over bribery charges that could land him back in jail. He faces additional allegations in a landmark case that inflamed popular anger over the chaebols that control the country’s economy and helped bring down former president Park Geun-hye.―Livemint