Samsung expects third-quarter operating profit to set three-year record
Samsung Electronics Co. Ltd. today posted its preliminary earnings report for the third quarter, disclosing that operating profit jumped an estimated 28% year-over-year in the three months ended in September.
The South Korean electronics giant believes that it generated an operating profit of about 15.8 trillion won or approximately $13.26 billion. The figure represents a three-year record: Samsung’s results are only exceeded by its earnings in the third quarter of 2018.
Still, the market was expecting more: Analysts polled for the Refinitiv consensus estimate projected a slightly higher operating profit of 16.1 trillion won.
Revenue increased as well during the three months through September. By Samsung’s estimates, consolidated sales for the quarter likely rose 9% year-over-year to a record 73 trillion won, or about $63.1 billion.
According to Reuters, about half of Samsung’s operating profit in the first half of the year was generated by its semiconductor business. The company is the world’s largest maker of memory chips and produces cutting-edge processors as well. According to analysts cited by Reuters, an increase in the volume and price of memory chips that Samsung shipped during the third quarter likely boosted the operating profit of the company’s semiconductor business by a hefty 79%.
Samsung disclosed plans to double chip manufacturing capacity by 2026 shortly before the preliminary earnings report. Additionally, the company provided an update on its efforts to mass produce chips using the upcoming three-nanometer semiconductor manufacturing process. Samsung plans to have its three-nanometer process ready for mass production in the first half of 2022, with the company expecting that chips made using the technology will offer better 30% performance or 50% higher power efficiency than previous-generation silicon.
Ahead of the preliminary earnings report, Samsung also shared new information about its semiconductor business’ longer-term roadmap. The company intends to launch a newer, more advanced version of its three-nanometer process in 2023. Further down the line, Samsung is hoping to start mass producing chips based on even more sophisticated two-nanometer manufacturing technology in 2025.
The switch to new manufacturing processes is particularly significant for Samsung given that the company intends to refresh its chips’ transistor architecture as part of the initiative. Samsung’s current chips are based on the widely used FinFET architecture. Starting with the three-nanometer process, Samsung intends to implement a new, multilayered transistor design.
Alongside Samsung’s semiconductor business, another major contributor to the preliminary third-quarter results was the company’s mobile device unit. Samsung is the world’s largest maker of Android smartphones. In the third quarter, the company introduced two new foldable devices: the flip phone-inspired Galaxy Z Flip 3 and the Z Fold 3, a tablet that uses a hinge to turn into a smartphone.
During the previous quarter, both Samsung’s mobile device and semiconductor businesses were affected by the global chip shortage. The supply crunch led to an increase in chip prices that boosted the semiconductor business’ profitability. However, the same shortage of components weighed on Samsung’s mobile device business, making it more difficult to produce handsets.
In the third quarter, another factor believed to have influenced Samsung’s earnings is that Apple Inc. is increasing mobile display orders as it prepares to launch the iPhone 13. Apple competes with Samsung in the handset market, but it’s also a customer: Samsung produces the displays that power several of the iPhone maker’s key products. Citing analysts, Reuters reported today that it’s believed the iPhone 13 likely helped Samsung’s display business achieve “solid” earnings in the third quarter.
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