Samsung Electronics' Q1 net profit soars on chips

SEOUL, April 26 (Yonhap) -- Samsung Electronics Co. said Thursday its first-quarter net profit advanced 52.11 percent from a year earlier, following improved returns from its crucial chip operations as well as smartphone sales. Net profit reached 11.6 trillion won (US$10.7 billion) for the January-March period, compared with 7.6 trillion won posted a year earlier, the South Korean tech giant said through its earnings guidance report. Operating profit reached a record-high of 15.6 trillion won, up 58.03 percent from the first three months of last year, the company said. It also moved up 3.27 percent from the previous record of 15.1 trillion won posted a quarter earlier. Sales jumped 19.82 percent to 60.5 trillion won, compared with 50.5 trillion won in the same three-month period in 2017. First-quarter operating profit came in line with the estimate of 15.6 trillion won forecast through a preliminary guidance report released earlier this month. The crucial chip business saw its operating profit reach 11.55 trillion won, rising sharply from 6.31 trillion won posted a year earlier, Samsung Electronics said. With sales of the chip segment reaching 20.78 trillion won, Samsung posted a record-high operating profit-to-sales ratio of 55.6 percent for the sector, indicating improvements in the sector's profitability. The company said the robust performance was attributable to the expanded sales of high-end DRAM chips for servers. The IT and mobile division, which covers smartphones, saw its operating profit hit 3.77 trillion won in the first quarter, soaring from 2.07 trillion won posted last year. Samsung said the increase was based on the early release of the flagship Galaxy S9 smartphone, while the predecessor Galaxy S8 also posted sound sales. The mobile arm's performance beat the market's earlier forecast of around 3 trillion won in operating profit. In the first quarter of 2017, Samsung's mobile business posted a weaker operating profit in the aftermath of the suspended production of Galaxy Note 7 smartphones. In the fourth quarter of the year, the operating profit also stayed at 2.4 trillion won due to heightened competition with Apple Inc.'s iPhone X. In a bid to revitalize the smartphone segment, Samsung released the Galaxy S9 in March this year, compared to the Galaxy S8 which went on sale in April 2017. Samsung hinted earlier this month that shipments of Galaxy S9 smartphones hover above 10 million units. The combined shipment of handsets in the January-March period came to 86 million units, with smartphones accounting for around 90 percent, Samsung said. The average sales price of its devices came to around $250. Industry watchers, however, are divided over the performance of Samsung's earnings down the road, especially as the company has been losing footholds in India and China, which are considered major markets with growth potential. The consumer electronics arm, however, reported an operating profit of 280 billion won, down from 410 billion reached last year. Samsung said the decrease came as it reduced its portfolio of low to mid-budget products. The display panel business managed to post an operating profit of 410 billion won, down from 1.3 trillion won a year earlier, the company said, citing intensified competition in the global LCD market. Harman International Industries, acquired by Samsung last year, posted an operating loss of 40 billion won. As for the second quarter, Samsung said the chip sector is anticipated to post sound returns on rising demand from the server segment along with recovery of demand from the mobile industry. The company said the demand for DRAM chips for servers will not only grow in the United States but in China as well. "Demand for server and mobile DRAM is expected to be robust, and orders for high density storage chips will grow as the price of NAND softens in the second quarter," the company said. "For the System LSI and Foundry businesses, shipments of 10-nanometer APs and cryptocurrency mining chips will expand, but earnings will be impacted due to sluggish demand for smartphone components." Samsung said the global market for DRAM and NAND flash products will grow 20 percent and 40 percent this year, respectively, with the company also set to post a similar growth. The smartphone business is expected to post weaker earnings in the April-June period due to suspended production of older budget models along with rising marketing costs, Samsung said, claiming consumers now tend to use handsets for a longer period. Samsung added that it rolled out a facility investment of 8.6 trillion won in the first quarter, with the chip and display sectors taking up 7.2 trillion won and 800 billion won, respectively. The company said it has not yet decided its yearly investment plan but hinted that the combined amount will fall from last year considering it already rolled out major investments in flexible OLED and other new technologies in 2017. "In the mid to long-term, Samsung will strengthen its business capabilities by delivering differentiated technology in the component business and solidifying its leadership in cutting-edge technologies such as AI and 5G," Samsung said. "The company believes opportunities will widen for the set business as digital devices become increasingly connected." On the release of foldable devices, Samsung said it is carrying out research on both hardware and software. The company said it aims to improve the quality of such devices, rather than just focusing on becoming the first in the industry to release them. Samsung Electronics also decided to hand out quarterly dividends of 17,700 won per share. The combined amount is estimated at 2.4 trillion won. The company added that its cash holdings came to 70.2 trillion won as of the end of March, up 8.4 percent from a year earlier. Shares of Samsung Electronics closed 3.45 percent higher at 2,607,000 won. The first-quarter report was released before the market opened Thursday. colin@yna.co.kr (END)