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Samsung expected to post higher profit than Apple for the first time
Samsung Electronics Co. Ltd.’s second quarter looks to be its most profitable yet.
In the preliminary earnings report for the three months ended last month, released early Friday, the technology giant estimated that operating income totaled 14 trillion won ($12.1 billion) on 61 trillion won ($44.9 billion) in revenue. That would represent a new all-time high, and a hefty 72 percent jump from the same period a year ago. According to analysts, Samsung is now on track to surpass rival Apple Inc. in profitability for the first time.
The average result of 19 outside estimates collected by Reuters puts the iPhone maker’s second quarter operating income at $10.49 billion on revenue of $44.9 billion. A big part of the reason why Samsung may come out ahead is the growing demand for memory chips, which has caused prices to increase dramatically over recent months. Market research cited by Bloomberg shows that the average cost of a 4-gigabyte DDR3 chip rose to $2.97 in the second quarter from $1.58 a year earlier.
Samsung’s report didn’t break down the numbers by division, but outside projections agree on the central role of its memory business in the profit jump. Greg Roh of HMC Investment Securities Co. believes that Samsung’s chip group generated profits of 7.5 trillion won ($6.5 billion) during the second quarter while the mobile devices for which it’s best known brought in 3.8 trillion won ($3.3 billion).
Semiconductors are only set to become a bigger growth driver over time as the company expands production. Just this week, Samsung revealed plans to spend $18.6 billion on upgrading two of its South Korean flash fabrication plants. The biggest site, which was inaugurated on the day the investment was announced, is poised to generate annual revenues of $40 billion once it becomes fully operational.
Samsung’s continued investments are expected to keep its momentum going into the second half of 2017. HMC’s Greg Rog told Bloomberg that the company is on track to set yet another record in the third quarter and generate profits of 15.2 trillion won ($13.1 billion) thanks to the widely praised Galaxy S8.
Samsung will release the full earnings report for the second quarter later this month.
Image: Samsung
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