Samsung to ride soaring chip profits in first quarter, Galaxy S8 aura in 2017

Tue Apr 4, 2017 7:11pm EDT
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By Se Young Lee

SEOUL (Reuters) - Record earnings at Samsung Electronics Co Ltd's (005930.KS: Quote) chip division are set to propel the tech giant's first-quarter profit to a three-and-a-half-year high, and the quarters ahead could be even better if its newest smartphone, Galaxy S8, is a success.

A boom in memory chips spurred by demand from smartphones and servers has helped Samsung tide over the costly failure last year of its Galaxy Note 7 smartphone and management turmoil. Vice Chairman Jay Y. Lee is on trial for bribery and other charges linked to a corruption scandal that led to the ouster and arrest of South Korean President Park Geun-hye.

Shares of Samsung, Asia's biggest company by market capitalization and the world's largest memory chip maker, are near record highs after gaining nearly 17 percent so far this year, on top of the 43 percent surge in 2016.

A Thomson Reuters survey of 18 analysts has on average estimated Samsung's January-March operating profit to have risen 41 percent from a year earlier to 9.4 trillion won ($8.44 billion), driven by record chip division profit of 5.8 trillion won. That's its highest profit since the best-ever 10.2 trillion won profit clocked in the third quarter of 2013.

And as Samsung prepares to start selling its revamped Galaxy S8 from April 21, the average forecast from the same survey tips Samsung to report a record 11.9 trillion won profit in the second quarter.

"Right now it's about as good as it gets for Samsung," said Park Jung-hoon, fund manager at Samsung shareholder HDC Asset Management.

Samsung will issue its earnings guidance early on Friday.

Analysts expect tight supply conditions for memory chips to continue this year, particularly in NAND flash chips used for long-term data storage, keeping Samsung's margins padded. That leaves the mobile division as the key earnings variable, they said.   Continued...

Shareholders walk past the logo of Samsung Electronics before their general meeting at a company's building in Seoul, South Korea, March 24, 2017.  REUTERS/Kim Hong-Ji