Oct 06, 2016

    Samsung's chip orders to ease loss from Note 7


    SCARRED by the global recall of its flagship smartphone, Samsung is set to report tomorrow it still expects a small rise in third-quarter profit, analysts said, with healthy sales of memory chips and displays easing the pain.

    Lost sales and expenses tied to the recall of at least 2.5 million Galaxy Note 7 handsets to fix battery problems could cost the firm nearly US$5 billion (S$6.9 billion) this year.

    That could sap momentum from a nascent rebound in the firm's mobile business, an underperformer in recent years.

    But a pick-up in the memory chip market, led by demand from rival smartphone maker Apple, will buttress earnings, company watchers noted.

    A Thomson Reuters SmartEstimate, from a survey of 20 analysts, tips overall July-September operating profit to have edged up 0.7 per cent from a year earlier to 7.4 trillion won (S$9.1 billion).

    "So long as the operating profit number comes in at a low seven trillion won level, the market will look at it and think some noise surrounding the Note 7 recall has cleared," said HDC Asset Management fund manager Park Jung Hoon.

    Analysts have lowered their expectations for Samsung's mobile division since the Sept 2 recall made global headlines.

    But analysts said its chips division - the firm is the world's biggest memory chip maker - will soften the Note 7 woes as other smartphone makers placed chip orders and drove prices higher ahead of the year-end shopping season.

    Analysts noted the semiconductors' uptrend was more pronounced for NAND memory chips - for long-term data storage - as demand started to outpace supply during the quarter, due to demand from Apple and Chinese smartphone makers.