Samsung Electronics, the world's largest memory chip and LCD panel maker, reported its best sales ever in the third quarter due to strong demand for semiconductors and mobile phones, but it predicted a challenging fourth quarter.
The company's sales rose 12 percent year-on-year to 40.23 trillion won (US$35.74 billion), beating its previous sales record of 39.25 trillion won, from the fourth quarter of 2009. The company's net profit increased 17 percent to 4.46 trillion won.
Samsung's chip and LCD products commanded a premium in the third quarter despite a more challenging business environment caused by slowing demand for PCs and TVs, as well as a continued economic slowdown in developed markets such as the U.S. and Europe, said Robert Yi, vice president and head of Samsung's investor relations team, in a conference call.
The broader economic challenges will hurt Samsung more in the fourth quarter. The rising cost of raw materials, stiffer competition, falling prices for LCD panels and DRAM, and the rising value of the Korean won will hurt the company's financial results as well, said Yi.
"Overall, we expect fourth quarter conditions to be difficult," he said.
And in this case, what's bad for Samsung is good for consumers. The company believes lower prices for components will ease a parts shortage that has plagued the PC industry this year and should see PC vendors putting out more promotions to boost sales in the fourth quarter, according to Cho Nam Seong, senior vice president of Samsung's semiconductor business.
He said DRAM prices could fall as much as 30 percent quarter on quarter in the third quarter.
Samsung is considered a technology industry bellwether because it is the world's largest producer of several products, including flat-screen TVs, DRAM, NAND flash memory chips and LCD screens. It's also the second-biggest mobile phone vendor.
Samsung believes the mobile phone market will grow around 10 percent in the fourth quarter led by smartphones, while tablets will also start to have an impact during the quarter.
"Demand for tablets is expected to grow substantially," said Kim Hwan, vice president of Samsung's mobile communications business.
Samsung's Galaxy Tab will be available from 140 carriers around the world, including four in the U.S., he said.
The company believes its smartphone shipments will achieve four-fold growth for all of 2010, led by products such as the Galaxy S. Samsung is also working on more affordable smartphones for emerging markets.
Samsung maintained its target of 270 million handset shipments this year, and said it shipped 71.4 million handsets shipped in the third quarter.