Samsung books record Q2 profit that tops estimates on S8 phone, chips

Samsung Electronics' income rose to a record 10.8 trillion won (S$13.16 billion) in the three months ended June.
Samsung Electronics' income rose to a record 10.8 trillion won (S$13.16 billion) in the three months ended June.PHOTO: REUTERS

SEOUL (BLOOMBERG) - Samsung Electronics posted record earnings that beat analysts' estimates on the success of its new Galaxy S8 smartphones and surging prices of semiconductors.

Net income rose to a record 10.8 trillion won (S$13.16 billion) in the three months ended June, the company said in a filing on Thursday (July 27). That compares with the 9.75 trillion won average of projections compiled by Bloomberg.

The results come at a critical time with the trial of billionaire heir apparent Jay Y Lee winding down to its final proceedings in a scandal that has kept the vice-chairman away from Samsung for half a year. In his absence, Samsung has released the S8 to glowing reviews, helping it recover from the Note7 recall, while also boosting investment in chips to meet demand from rivals including Apple Inc.

"The S8 has indeed helped get Samsung back onto its feet, hopefully putting the Note7 debacle behind it," Bryan Ma, a technology industry analyst at IDC, said before the announcement. "But we also have to keep in mind that a lot of Samsung's momentum is from memory and displays too, so it's not all about the S8 either."

Operating profit for the second quarter was 14.1 trillion won on sales of 61 trillion, the company said, slightly adjusting preliminary numbers released earlier this month.

Lee, 49, is accused of bribing a confidante of the nation's then-president to facilitate a merger that increased his sway over Samsung Electronics. Detained since February, he has denied wrongdoing through lawyers and is scheduled to speak in court himself this week with a verdict expected next month. Lee has overseen the Samsung conglomerate after his father Lee Kun Hee suffered a heart attack in 2014 and was hospitalised.

Samsung shares rose 1.3 per cent in early trading on Thursday, and are near record highs this year, shrugging off the dramas surrounding the Note7. The company has blamed a faulty battery design and taken billions of dollars in losses from the fiasco. It released the Galaxy Note FE in South Korea this year by reassembling unused parts from the Note7.

Operating profit from the mobile business was 4.06 trillion won. Samsung's chips unit reported 8.03 trillion won while the display business had earnings of 1.71 trillion won.

Samsung has rallied on a shortage of memory chips this year. Prices of DDR3 4-gigabyte DRAM chips rose to US$3.12 at the end of June, up from US$2.98 at the end of March and nearly double from a year earlier, according to data from InSpectrum Tech Inc.

Displays make up another major part of Samsung's business portfolio. Apple, which is expected to unveil the 10th anniversary version of its iPhone later this year, is said to be adopting a display using organic light-emitting diode that is made by Samsung.

Earnings have helped morale at Samsung even as the troubles surrounding its controlling family continue.

Lee has been detained on bribery and embezzlement charges in connection with a national influence-peddling scandal that led to the ouster of President Park Geun Hye in March. Lee's father, who transformed the company into a global appliance maker, remains hospitalised more than three years after a 2014 heart attack.