Samsung expects strong profits thanks to chips, Galaxy S7 phone

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Samsung Electronics Co. Ltd. has managed to overcome both a political scandal and an exploding phone.

The Korean electronics giant issued preliminary guidance for its first-quarter 2017 Thursday, forecasting an operating profit of 9.9 trillion won ($8.8 billion) and sales of $50 trillion won ($44 billion). The strong showing underscores the strength of a business that’s yet to recover from the Galaxy Note 7 debacle and the arrest of its vice chairman, Lee Jae-yong.

The company’s operating profit is its second-highest ever for a quarter, and represents a 48 percent jump from a year ago. It also marks a 7.4 percent rise from the previous quarter. The company’s highest-ever operating profit was 10.1 trillion won ($8.9 billion), recorded in the third quarter of 2013.

The strong guidance failed to shore up investor’s confidence in the firm, however, as shares in Samsung fell almost 1 percent in early trading.

Although Samsung was left reeling by the Galaxy Note 7’s exploding battery fiasco last year, the company’s mobile division contributed around 2 trillion won ($1.76 billion), thanks to strong sales of its Galaxy S7 series.

The biggest earner, though, was Samsung’s semiconductor business, which South Korean analysts say pulled in more than 6 trillion won ($5.2 billion) in profit. The company’s display business contributed a further 1 trillion won ($880 million) on strong demand for LCD panels in China, according to analysts.

The success of Samsung’s semiconductor business can be put down to strong demand for its DRAM and NAND flash memory chips from Chinese smartphone makers, which are now rolling out flagship models with up to 6 gigabytes of RAM.

The company has had a rough time of it recently. Problems began last year with widespread reports of exploding Galaxy Note 7 handsets. Then, earlier this year the company’s de facto leader Lee Jae-yong was arrested by South Korean authorities and charged over his involvement in the corruption scandal that led to the impeachment of former President Park Geun-hye.

However, Lee’s involvement in the corruption scandal is unlikely to have any long-term impact on Samsung’s brand, analysts says. Meanwhile, the worst of the effects of the Note 7 debacle appear to be over. Last month, Samsung announced plans to sell refurbished versions of the Note 7 that were previously taken off the shelves because of fears over their explosion-prone batteries.

Late last month, Samsung unveiled its latest flagship handset, the Galaxy S8, which analysts believe could give the company’s mobile business a boost over the next few quarters.

The Samsung Galaxy S8 boasts a number of high-end features, and received rave reviews for its display, which one research firm rates as the best-ever on a smartphone. That display may also make its way onto Apple’s next iPhone later this year, with the company reported to have placed an order for about 160 million OLED panels from Samsung Display.

Samsung’s official earnings report will be announced at the end of this month.

Image: leejeongsoo/Pixabay.com