Samsung's chips push it to record profits

The Korean company is making a lot of money from its components business.

Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Shara Tibken
3 min read

Samsung's benefiting from strong sales of its components and mobile devices. 


Samsung may be known for its phones, but when it comes to its earnings, it's all about the chips. 

The South Korean technology giant on Monday reported its biggest operating profit ever as it benefited from strong demand for its memory chips and other components. Samsung not only uses processors it manufactures in its own devices but also sells them to customers like Apple. 

The company said its third-quarter operating profit nearly tripled to 14.53 trillion won ($12.92 billion) as it recovered from last year's Note 7 fires and recall. Samsung also generated revenue of 62.05 trillion won ($55.18 billion), up 30 percent from the previous year. 

"Strong demand for high-performance memory chipsets for servers and flagship mobile devices was a contributing factor to the company's overall robust performance," Samsung said in a press release. 

Overall, Samsung's semiconductor operating profit nearly tripled to 9.96 trillion won ($8.86 billion), while revenue soared 51 percent to 19.9 trillion won ($17.7 billion).

The mobile segment didn't fare quite as well. Phone shipments grew because of the Galaxy Note 8 and Galaxy J series, but revenue and earnings in that segment declined sequentially because more customers sought out mass-market smartphones instead of its pricier devices, Samsung said. Still, the numbers increased from the previous year.

Samsung's record results come despite a tough year for the tech giant. It sells more smartphones and TVs than anyone else in the world, but it's had some quality issues with some of its most popular devices. The most notable problem was the Note 7, its much-applauded phone that literally went up in flames. Samsung was forced to recall the Note 7 after a battery flaw caused dozens of the phones to explode or burst into flames, costing the company upwards of $5 billion in lost sales and other expenses.

Samsung's also facing some uncertainty in its top ranks. Jay Y. Lee, its co-vice chairman and heir apparent, has been sentenced to five years in prison. Its other co-vice chairman and the head of its chip business, Kwon Oh-hyun, earlier this month said he would retire after three decades at the company. And Samsung's chairman, Lee Kun-hee, has been in a coma since a 2014 heart attack.

Intense competition

Samsung's results come a few days before rival Apple reports its own quarterly numbers. Both companies have been facing a slowdown in the mobile market but are still attracting millions of buyers with their phones. In the case of Samsung, that's the Galaxy S8 and S8 Plus from this spring and the Note 8 from September. Apple, for its part, introduced the iPhone 8 and 8 Plus last month and will launch its flash iPhone X on Friday.

Samsung gave a nod to the upcoming iPhones -- without mentioning them by name. The company said it expects smartphone and tablet demand to rise in the fourth quarter because of the year-end holiday season. But it also anticipates competition "to intensify in the premium segment." 

iPhone 8 Plus vs. Galaxy Note 8: the results of our comparison

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In the third quarter, mobile sales rose 23 percent from the previous year to 27.2 trillion won ($2 billion). Sequentially, revenue dropped 6 percent.

It expects smartphone market growth to recover in 2018 but cautioned that "the difficult business environment is likely to continue due to intensifying competition and higher materials costs."

Overall, Samsung expects its earnings to grow in 2018 "primarily from the component businesses, as conditions in the memory market are likely to remain favorable and the company expects increased sales of flexible OLED panels."

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