Samsung profits soar after recovery from Note 7 debacle
The costly Galaxy Note 7 debacle, which led to the recall of about 3 million smartphones because of overheating batteries, seems to be behind Samsung Electronics, with the company forecasting a 48 percent growth in operating profit in the first quarter.
Samsung has not had a new flagship smartphone on the shelves ever since it stopped production of the Note 7 in October after replacement phones shipped by the company were also found in some cases to have the battery issue. The company now has its hopes for the high-end of the smartphone market pinned on the new Galaxy S8 and S8+, which are expected to reach shelves later this month.
The company’s components business, consisting of display panels and memory chips, is likely to have helped boost the company’s profit in the first quarter.
The South Korean company said Friday it expects its operating profit in the first quarter was 9.9 trillion won ($8.8 billion), up 48 percent from 6.7 trillion won in the same period last year. Samsung said in its earnings guidance that it expects revenue will remain flat at around 50 trillion won for the quarter from 49.78 trillion won in the same quarter a year ago.
The final results for the quarter are expected later this month.
The initial indications for the Galaxy S8 are rather positive, said Bryan Ma, vice president for devices research at IDC. “Assuming that a Note 7-like catastrophe doesn’t rear its ugly head again, Samsung’s phone sales should have the potential to add to what is already a booming components business in the quarters ahead,” he added.
A turnaround at the company was already evident in the fourth quarter of 2016 when the company posted a 50 percent growth in operating profit to 9.22 trillion won on revenue of over 53 trillion won.
The company’s components business helped it in the fourth quarter as well. It reported in January that its fourth quarter earnings were driven by the components businesses, mainly its memory business and its display panel unit, which makes OLED and LCD screens.
Samsung said its focus in 2017 in the components business was to boost profitability in DRAM and NAND, as it was seeing continuing growth in demand for these components for data center servers and mobile devices. It planned to differentiate itself from competition in the display business with value-added products focusing on UHD and large-size TV panels.
The company has been under a cloud after its vice chairman Lee Jae-yong was arrested in February on charges of bribery, in connection with an investigation into an alleged corruption scandal that led to the ouster of South Korea’s former President Park Geun-hye. Lee is largely seen as the de-facto leader of the Samsung Group, running the business on behalf of his ailing father, Samsung Chairman Lee Kun-Hee.