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Samsung Scales Back Capital Spending As Earnings Top Estimates

Samsung Electronics Co. posted quarterly profit that topped analyst estimates on growth in its memory chip business as it announced a reduction in capital spending for the year.

Net income rose to 13 trillion won ($11.4 billion) in the three months ended September, the Suwon, South Korea-based company said in a filing Wednesday. That compares with the 12.9 trillion won average of estimates compiled by Bloomberg. Capital spending this year would drop 27 percent to 31.8 trillion won. The shares rose.

Demand for memory in everything from mobile devices to servers and personal computers is fueling record chip sales and helping tide Samsung over amid fierce competition in smartphones. The South Korean giant is seeking to counter an expected slowdown next year by generating more revenue from the handsets and displays panels it produces.

The share price should rebound on confidence that demand for memory chips is going to go back up in the bottom half of next year,” said Song Myung-sup, an analyst at HI Investment & Securities Co in Seoul. “We’re searching for clues on it.”

Samsung said it’s seeing “weak seasonality” for the chip market in the fourth quarter, and warned that overall earnings would decline in the period. Samsung shares rose 2.1 percent in early trade on Wednesday, paring this year’s declined to 15 percent.

Operating profit was 17.6 trillion won on sales of 65.5 trillion won, the company said, in line with preliminary numbers released earlier this month.

Samsung, SK Hynix Inc. and Micron Technology Inc. together control more than 90 percent of the market for dynamic random access memory, or DRAM, chips, used in everything from data servers to smartphones. Operating income from the chip unit amounted to 13.7 trillion won, accounting for the lion’s share of profit.

Contract prices for 32-gigabyte DRAM server modules fell 0.1 percent in the three months ended September, the first quarterly decline since 2016, according to InSpectrum Tech Inc. Prices for 128 gigabit MLC NAND flash memory chips fell about 6.9 percent.

Samsung’s smartphone division posted 2.2 trillion won in operating income, down from 3.3 trillion won a year earlier.

While Samsung is the world’s biggest handset maker, it’s struggling with shrinking market share as Chinese rivals Huawei and Oppo catch up while Apple Inc. seeks to win over shoppers for premium devices.

Samsung supplies OLED screens to Apple Inc. for its iPhones even as the two companies vie for dominance in the premium phone market. Samsung’s operating profit from its display business was 1.1 trillion won, up from 970 billion won a year earlier.

Samsung’s consumer electronics unit, which includes TVs and appliances, had operating profit of 560 billion won.

Samsung is one of South Korea’s biggest exporters and said earlier this year that one of its biggest obstacles for business would be global protectionism, warning its employees to brace for potential implications. The company is expanding its ability to produce memory chips and smartphones, spending tens of billions of dollars in semiconductor plants and building the world’s largest smartphone factory in India. – Financial Express

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