Friday, October 28, 2016

Samsung sees first profit growth in two years – but thanks to Apple, not to phone sales

Samsung has today forecast a reversal of its seven-quarter decline in profits, suggesting an impressive year-on-year hike of almost 80%. But while the company itself hasn’t released any details on where the profit is coming from, analysts cited by the WSJ and elsewhere put it down to strong growth in sales of chips and displays – not phone sales.

This suggests that Samsung is making its money by helping other manufacturers sell their phones – with Apple’s record-breaking iPhone 6s sales doubtless playing a significant role. Apple split its A9 chip orders between Samsung and TSMC.

While the mobile-phone business isn’t likely to see a significant rebound as growth in global demand for smartphones cool amid saturated markets, Samsung’s earnings are being powered by strong growth in its chip business due to tight supply and firm pricing, analysts say. Samsung’s chip unit likely accounted for about half of the company’s profit in the third quarter, analysts said, while strong sales of displays to Chinese smartphone makers also contributed to its bottom line.

Samsung is estimating that its Q3 profits rose to 7.3 trillion Korean won ($6.3B), its first year-on-year growth since the same quarter in 2013.

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