Defying scandals, Samsung forecasts best quarterly profit in over 3 years as chips soar

Samsung said its January-March profit was likely 9.9 trillion won (S$12.27 billion).
Samsung said its January-March profit was likely 9.9 trillion won (S$12.27 billion). PHOTO: REUTERS

SEOUL (REUTERS, BLOOMBERG) - South Korean tech giant Samsung Electronics forecast on Friday (April 7) its best quarterly profit in more than three years in the January-March period, beating expectations on the back of robust demand for memory chips.

The Apple rival and global memory chip leader said first-quarter operating profit was likely 9.9 trillion won (S$12.27 billion), compared with an average forecast of 9.4 trillion won from a Thomson Reuters survey of 18 analysts.

Revenue for the quarter rose 0.4 per cent to 50 trillion won, compared with analysts' forecast of 49.4 trillion won.

The results underscore how the electronics conglomerate is recovering from last year's Note7 crisis, when some smartphones burst into flames and forced Samsung to pull it from shelves. That was followed by the arrest of de facto chief Jay Y Lee in February in connection with an influence-peddling scandal.

Samsung shares touched a record high of 2.134 million won in late March on expectations of record earnings in 2017, as limited production capacity for the memory chip industry and growing demand for more firepower from devices such as smartphones and servers push up margins.

While Samsung will not provide detailed earnings results until the end of April, analysts tipped its chip division to earn a record 5.8 trillion won and propel the firm to its best overall operating profit since the third quarter of 2013.

Favourable memory market conditions will likely persist throughout 2017 due to diminishing production gains on investments and careful capacity management among chipmakers.

Samsung's latest flagship phone, the Galaxy S8, didn't debut until after the end of the quarter and isn't reflected in the latest figures. The performance of the S8, which goes on sale on April 21, will be the key variable for Samsung going forward. The new phone, which features a bezel-less display and voice-enabled digital assistant, was unveiled last week and will ship later this month.

Some analysts already project a first-year sales record for the smartphone giant, fuelling expectations that the device will make up for the costly collapse of the fire-prone Galaxy Note7 last year.