Samsung Electronics has posted an operating profit of a record KRW14.07 trillion for the second quarter of the year, an increase of KRW5.92 trillion over the corresponding period last year and marking an increase of 72.7 per cent.

Samsung’s revenue for the quarter was KRW61.00 trillion, an increase of 19.8 per cent YoY over KRW10.06 trillion revenue of Q2 2016.

In the second quarter, the components businesses drove significant earnings growth, both YoY and QoQ, thanks primarily to strong memory demand for high-density DRAMs and SSDs for servers. System LSI contributed to earnings through increased sales of AP and CIS products while the display panel business expanded sales of flexible OLED panels for premium smartphones and high-value LCDs under stable prices.

Profits from the mobile business, driven by robust sales for the Galaxy S8 and S8+, also increased significantly QoQ.

The Memory Business posted significant earnings growth, both YoY and QoQ, amid tight supply-demand conditions while strong ASPs coupled with increased demand from the server market also contributed to profits. The System LSI Business increased sales of mobile processors and image sensors.

For the Display Panel business, OLED earnings improved QoQ with the help of increased shipments of flexible displays for premium smartphones. LCD panels enhanced profitability QoQ due mainly to increased sales of high-end, large-size UHD panels, amid stable ASP conditions.

The Mobile Business saw a significant increase in earnings QoQ with the global rollout of the Galaxy S8 and S8+. However the operating profit margin declined slightly YoY due to strong component prices. Earnings for the TV business declined due to increased panel prices and slow demand from Europe and China. For the home appliances business, continued B2B investment led to a decline in earnings YoY.

Regarding Harman’s earnings in the quarter, it registered solid results from operations with $1.9 billion in sales and around $200 million in operating profit. However, with costs associated with the acquisition, net operating profit was approximately $5 million. Samsung expects such costs to continue to impact Harman’s results by an average of $100 million each quarter for the next few quarters.

Looking ahead to the third quarter, the company expects favourable semiconductor conditions to continue, although overall earnings may slightly decline QoQ as earnings weaken for the Display Panel and Mobile businesses.

For the Display Panel Business, an increase is expected in initial start-up costs for the new OLED production line, and intensifying price competition is forecast from LTPS LCD in the mid- to low-end rigid OLED segment. For the Mobile Business, earnings are forecast to decline due to increased marketing costs related to the launch of a new Note device, with reduced profit contributions from the Galaxy S8 and S8+.

Moving on to the outlook for second half, the company expects earnings to grow primarily from the component businesses, as conditions in the memory market are likely to remain favourable and the company expects increased sales of flexible OLED panels. However, ASP pressures on LCD panels and on rigid OLED panels, prompted by the industry’s increase in LCD supply, may remain a concern.

For the Memory Business, solid demand for servers and mobile devices will continue due to the expansion of new server platforms, cloud services and new smartphones to market in the second half. By expanding the supply of 1Xnm DRAM and 64-layer V-NAND, Samsung will further enhance product competitiveness.

The System LSI and Foundry businesses are also expected to post positive results, while the display segment anticipates an increase in revenue from the expanded supply of flexible OLED panels.
The Mobile Business will aim to sustain the strong sales momentum of premium smartphones through the release of a new Galaxy Note smartphone and continued sales of the Galaxy S8 and S8+. It will also continue to improve the line-up efficiency in the mid- to low-end segment to maintain profitability.

For the TV business, Samsung will focus on improving profitability by expanding its high-end offerings, including ultra-large size and UHD TVs. Additionally, the company expects to solidify its leadership in the premium segment with products such as The Frame and QLED TVs. Meanwhile, the Digital Appliances Business will seek to improve profits in the B2B segment.

Looking at the mid- to long-term, the company will strongly focus on enhancing the competitiveness of the company’s core businesses. To this end, Samsung will reinforce its technological leadership in the semiconductor and OLED industries and will focus on strengthening its design and manufacturing capabilities to transform the System LSI and Foundry businesses as future growth engines.

To respond to a paradigm shift in the IT industry, the company is set to develop new growth engines by making strategic investments and securing advanced technologies through M&As. Challenges lie ahead, however, due to volatilities in the global business environment.

Total capital expenditure (CAPEX) executed in the second quarter was KRW12.7 trillion, including KRW7.5 trillion for the semiconductor business and KRW4.5 trillion for the display segment. Although the capex plan for 2017 has not been finalized, the annual capex is expected to be significantly higher than the previous year.

The semiconductor businesses posted KRW8.03 trillion in operating profits on consolidated revenue of KRW17.58 trillion for the quarter. – TradeArabia News Service