Samsung Electronics Co. said its operating earnings plunged 56 per cent in the third quarter from a year earlier, mainly hit by continuing falls in global chip prices, but its performance was better than the market had expected. The operating profit was estimated at 7.7 trillion won ($6.4 billion) in the July-September period, according to its earnings guidance. The figures were above market expectations of 6.99 trillion won, according to the report by Seoul-based financial market tracker FnGuide, Yonhap news agency reported. The South Korean tech giant expected its overall sales to have fallen 5.3 per cent on-year to 62 trillion won in the three-month period. The sales estimate stood at 60.6 trillion won on average.
The company logged a quarterly high record during the third quarter of last year. It marks the fourth consecutive quarter that the world's largest semiconductor and smartphone maker has reported an on-year drop in operating profit. Also, Samsung has been grappling with the semiconductor industry's downturn amid slowing demand for smartphones and other electronic gadgets since late last year. Market watchers said a supply glut of DRAM and NAND flash chips, which account for more than two-thirds of the firm's sales, dragged down its profitability.
An ongoing trade war between the US and China and export curbs by Japan on key industrial materials crucial for the production of chips and displays have also made it harder for the market to gauge demand, the watchers said. They voiced optimism, however, for improvement down the road, expecting prices of NAND, mostly used in mobile devices, to pick up later this year, given a stabilising inventory level and rising demand.
"It looks like Samsung Electronics has bottomed out," said an industry watcher who asked not to be named, adding that its earnings would recover next year after a seasonal slowdown during the fourth quarter. The mobile division was also expected to have logged improved results during the third quarter on the back of strong sales of its Galaxy Note 10 and its cheaper Galaxy A series, the analysts said. The company earlier announced that it has sold over 1 million Galaxy Note 10s in South Korea, making it the fastest Samsung smartphone to reach the milestone. Note 10 was released only in the 5G model in the domestic market on August 23.
The analysts said Samsung's smartphone sales recovered thanks to its revamped mid-range Galaxy A series, which enjoyed popularity in Southeast Asia and Europe. "The handset division's operating profit ratio dropped to the 5-per cent level during the second quarter but is expected to have recovered to the 8-per cent level during the third quarter," said Yoo Jong-woo, a researcher at Korea Investment and Securities Co.
Samsung did not break down the performances of its respective business divisions, saying it will announce the detailed earnings later this month. Shares of Samsung Electronics were trading 1.26 per cent higher at 48,350 won on the Seoul bourse as of 10.28 a.m., The earnings guidance was announced before the market opened.
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