Samsung Electro-Mechanics will earn an estimated 293.7 billion won ($244.75 million) in operating profits this year, 347.2 billion won ($289.3 million) next year, and 437.1 billion won ($364.25 million) in 2017, according to a report by Hyundai Securities on Tuesday.
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Analysts also said Samsung’s chip division likely remained its top profit contributor for a fifth straight quarter due to new smartphone launches from a range of manufacturers, while display profits were probably helped by rising sales to clients such as Huawei Technologies Co Ltd [XTC.UL].
In fact, Reuters notes today that “The world’s largest handset maker is forecast on Wednesday to guide for its first annual increase in quarterly profit in two years following a dismal third quarter in 2014, but profits and mobile margins are expected to contract on a sequential basis”.
Samsung was also helped by the weakness of the Korean won, since it sets most of its component prices in U.S. dollars.
Samsung reported operating profit of 7.3 trillion won for 3QFY15, marking a year-over-year (YoY) increase of 78% and beating consensus estimates of 6.6 trillion won by 10%.
FKI’s business survey index, from a poll of 600 local companies, showed an overall negative outlook for six consecutive months.
Samsung Electronics has managed to reap profits that far surpass market expectations, as third-quarter gains in the company’s semiconductor sector have aligned with favorable shifts in exchange rates.
Cost cutting measures and improvements in the management of smartphone inventory also aided the company, according to Yoo Eui-hyung, an analyst for Dongbu Securities.
If so, this would trump market analysts who have predicted that Samsung’s operating profit will be closer to 6.7trn won.
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It marked the first time since the fourth quarter of past year that Samsung’s sales exceeded 50 trillion won. Clearly, with semiconductor sales being much higher, and with bearish sentiment over the potential of its smartphone business, Samsung seems to be making higher profits through its chip business rather than its smartphone business. Samsung makes more in monetary terms when sales of chips and screens are translated back into Korean won. They debuted after lackluster sales of the premium Galaxy S6 prompted the company to cut prices and offer a $120 rebate to customers buying on installments or a leasing plan. In the previous three months ending in June, the electronics giant had a negative earnings shock mainly from disappointing sales of its flagship Galaxy smartphones.
