Samsung reports highest profit in two years on chips, LCDs
- — 24 July, 2009 13:36
Samsung Electronics reported its highest quarterly net profit in over two years on Friday as its semiconductor and LCD businesses returned to profitability.
The company's second quarter was also helped by stronger sales of LCD TVs and mobile phones, and the company noted increasing sales of Mobile WiMax network equipment.
The world's largest memory chip and LCD panel maker said its net profit rose 5 percent year-on-year to 2.25 trillion Korean won (US$1.80 billion) in the second quarter, it's best showing since the fourth quarter of 2006, when its net profit was 2.37 billion won. Samsung's revenue rose 16 percent to 21.0 trillion won.
Samsung is considered a bellwether for the global technology industry due to its size and market share in important businesses, from memory chips and LCD panels to mobile phones. The strong results show demand for technology products remains resilient in the face of the global recession.
Two of Samsung's biggest businesses, semiconductors and LCD panels, both returned to profitability in the second quarter after two straight quarters of losses.
"We believe the LCD panel industry has passed the bottom and is improving as it enters the third quarter peak season," said Yeongduk Cho, vice president of Samsung's LCD business, in a conference call.
China proved a surprise for the company's LCD panels and TVs. Although some markets declined, "the Chinese economy rebounded heavily and that helped us," Cho said. Demand for TVs overall could rise to 25 million in China this year, he said, and if that happens the figure should reach 30 million next year, same as the U.S. or Europe.
Stronger than expected demand has taken LCD makers by surprise, and a shortage of glass supply will limit overall LCD panel supply growth over the next few months, Cho said.
LCD panel prices, one of the most expensive parts of laptop and desktop PCs, as well as LCD TVs, will rise in the third quarter, he said, predicting a slowdown in LCD demand could take hold in the fourth quarter if prices increase too much.
Rising DRAM prices helped Samsung return to profitability in its semiconductor division. The company noted stronger PC sales during the second quarter and said limited DRAM supply growth helped push up prices. PC shipments could rise 10 percent quarter-on-quarter in the third quarter, Samsung noted in its presentation materials.
Demand for higher end DDR3 (double data rate, third generation) DRAM chips increased for notebook PCs and servers, Samsung said. The chips offer far higher bandwidth than their predecessor, DDR2, and greater power efficiency.
NAND flash memory prices also increased as more of the chips were used in smartphones, Samsung said.
Mobile phone shipments rose 14 percent year-on-year for Samsung to 52.3 million units. Sales increased in developed and emerging markets, the company noted, saying sales of touchscreen and messaging phones remained robust in the U.S. and Europe.
The company forecast it will ship 200 million handsets this year.
Despite the upbeat report and return to profitability in its most important businesses, Samsung maintained a conservative outlook on the global economy.
"We maintain a cautious view looking ahead to the remainder of 2009 as operating profit may be affected by a possible appreciation of the Korean won and intensifying market competition," said Robert Yi, vice president and head of Samsung Electronics' investor relations team, in a statement.