Samsung Electronics reported an all-time high operating profit of 10.1 trillion won ($9.4 billion) in the third quarter powered by a rebound in its semiconductor business and a sharp rise in shipments of low-end smartphones.

According to the company’s regulatory filing Friday, its sales were estimated at 59 trillion won and operating profit at 10.1 trillion won during the July-September period. Sales went up 13 percent and operating profit rose 25 percent compared to the same period last year.

The figure surprised the market, as prominent analysts predicted that Samsung’s profit would stay below 10 trillion won because of sluggish sales in the TV and display segment and a slowdown in the mobile sector.

Industry sources credited the unexpected performance to its low-end smartphones. The rise in sales drove the operating profit of the whole mobile sector.

“The information technology & mobile business’ operating profits seem to have posted 6.6 trillion won. Though the share of overall handset sales taken up by high-end handsets went down from 42 percent to 33 percent, the operating profit of mobile sector edged up,” said Lee Min-hee, Seoul-based I’M Investment & Securities.

As for low-end smartphones like Galaxy S4 Mini or Mega, they do not have to be newly developed. They only have lower platform specifications than their higher-end equivalents, such as liquid crystal displays instead of organic light emitting diodes. The cost should thus be competitive, a source said.

Analysts predicted that Samsung Electronics shipped around 85 million smartphones in the third quarter, up 10 percent from the previous quarter.

The good result also appears to come from the rebound of its semiconductor business, with operating profits posting 2.4 trillion, a source said.

“The semiconductor segment helped to attain market dominance,” said Lee Jung, Eugene Investment & Securities. “The fire in SK Hynix’s Chinese plant in September boosted the markup of semiconductors, consequently benefiting Samsung Electronics.”

However, not all analysts are surprised by the result. Some said 10.1 trillion won figure is not a big jump from forecasts.

“I don’t think it can be considered earnings surprise,” KTB Investment & Securities’ analyst Jin Sung-hye said.

“Prior to Samsung’s estimate, the market consensus was already 9.9 trillion won. Considering the error range of 2 percent, this news is not really surprising.”

For Samsung’s fourth-quarter profit, many analysts said that it would be higher than the third quarter.

“There is no reason the fourth quarter’s operating profits should be lower. In the information technology & mobile business, the sales of Galaxy Note 3 ― which will go on sale at the end of third quarter ― will increase. DRAM and NAND cost are also likely to go up, improving Samsung’s profitability,” said Byun Han-jun, a research at KB Investment & Securities.

“TV shipments in the fourth quarter have usually risen over the past years. Demand for electronics and IT devices usually rises at the end of year due to Christmas day and Black Friday,” he said. “The profit of the fourth quarter will be around 10.5 trillion won.”

Other sources, however, said that fourth-quarter marketing costs could hold back profits.


By Shin Ji-hye
(shinjh@heraldcorp.com)