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Samsung to log robust Q3 earnings on chip biz, currency effect: analysts

This file photo shows Samsung Electronics Co.'s office building in Seoul. (Yonhap)
This file photo shows Samsung Electronics Co.'s office building in Seoul. (Yonhap)
Samsung Electronics Co. is expected to report strong third-quarter earnings on the back of its semiconductor business and a weak won, analysts said Monday.

The South Korean tech giant was projected to log 16.3 trillion-won ($13.8 billion) in operating profit for the July-September period, up 31.9 percent from a year earlier, while its sales were forecast to increase 12.2 percent on-year to 75.1 trillion won over the period, according to the data from nine local brokerage houses compiled by Yonhap Infomax, the financial news arm of Yonhap News Agency.

Compared with the previous quarter, Samsung's third-quarter operating profit and sales were estimated to increase 29.7 percent and 18 percent, respectively.

Samsung, the world's largest memory chip and smartphone producer, will announce its third-quarter earnings guidance next week.

Analysts predict Samsung's semiconductor business once again anchored the company's performance in the third quarter thanks to price hikes in memory chips and enhanced yield rates. They expected Samsung's chip business to log around 10 trillion won in operating profit for the third quarter.

Earlier this month, market researcher IC Insights predicted Samsung could log $22.32 billion in semiconductor sales in the third quarter and defend its status as the world's biggest chip seller.

"For its chip business, profitability improvement through cost reductions played a big part," said Kim Kyung-min, an analyst at Hana Financial Investment. "That is possible due to enhanced yield of advanced nodes in the non-memory sector and cost reductions efforts in the 15-nanometer DRAM and 128-layer NAND flash products."

With strong chip business, analysts said weak Korean won in the third quarter would have also contributed to Samsung's third quarter performance.

"Since the average won-dollar exchange rate in the third quarter is projected to be 40 won higher than the previous quarter, it appears to bring a positive impact to Samsung's operating profit of about 1 trillion won," said Song Myung-sub, an analyst at Hi Investment & Securities.

Samsung's mobile business was tipped to report better earnings than the previous quarter with more shipments and an increased average selling price with the launch of new foldable smartphones.

Samsung last month launched Galaxy Z Fold3 and Galaxy Z Flip3 devices with lower price tags than their predecessors.

Analysts estimated Samsung's IT & Mobile Communications division to post an operating profit of 3.5-3.8 trillion won in the third quarter.

"Shipment of low-to-mid priced smartphones appears to be solid, and sales of Z Fold3 and Z Flip3 are going better than expected," said Doh Hyun-woo, an analyst at NH Investment & Securities. "We expect Samsung's third-quarter smartphone shipment to reach 69 million units."

Analysts also expected improved earnings from Samsung's display business due to seasonality and may post better than the second quarter when a one-time gain is reflected. They estimated the display unit to log around 1.5 trillion won in operating profit.

"It is the peak season for OLED business, so its profitability is expected to improve," said Kim Un-ho, a researcher at IBK Investment & Securities. "It's also because shipments for new foldable smartphones and foreign devices are projected to go full swing."

Consumer Electronics (CE) division, which manages TVs and home appliances, was expected to post weak performance compared with the previous quarter with around 700 billion won in operating profit.

"Sluggish TV sales and increase material and logistics costs are likely to slow down the CE unit's performance," said Lee Seung-woo, an analyst at Eugene Investment & Securities.

For the fourth quarter, analysts predicted decline in Samsung's earnings due to a price drop in memory chips.

Market researcher TrendForce recently expected a 3-8 percent decline for DRAM chip prices and a 0-5 percent drop for NAND flash prices in the fourth quarter.

"It is projected that Samsung's operating profit will decline for the time being, as DRAM prices are expected to decline in the fourth quarter and see a further drop in the fourth quarter of 2022," said Eo Gyu-jin, an analyst at DB Financial Investment. (Yonhap)
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