Samsung Estimates First Profit Growth in Two Years Thanks to Sales of Chips, Not Hardware

[MacRumors]

Samsung this morning announced its forecast predictions for the company's third quarter, suggesting an overall year-over-year profit growth of 79.8 percent, which would be its first since 2013.

The company didn't provide specifics regarding where the profit came from, but analysts speaking with The Wall Street Journal attributed it to the "robust sales" of various chips and displays used in smartphones and other devices throughout the year. Specifically, those analysts believed Samsung's earnings this year are being fueled by the chip sales "due to tight supply and firm pricing."

Overall, the company's chip unit will likely account for nearly half of its total profit in the third quarter of 2015, with the addition of display sales bolstering the rest of its foreseeable monetary gains.

The South Korean technology company said Wednesday its operating profit for the three months ended Sept. 30 likely rose 79.8% to about 7.3 trillion Korean won (US$6.3 billion), its first year-over-year growth since the third quarter of 2013 when the company posted a 26% increase. Revenue likely rose about 7.5% to 51 trillion won.

Analysts were expecting Samsung to post an operating profit of 6.5 trillion won on revenue of 50.5 trillion won, based on a poll of nine analysts.

Most recently, Samsung announced the newest iterations of its smartphone lineup, the Samsung Galaxy Note5 and the Samsung Galaxy S6 Edge+, whose 5.7-inch displays make them slightly larger than Apple's iPhone 6s Plus and are marketed as a direct competitor to the Cupertino company's large-screened device. Announced and launched in August -- alongside services like Samsung Pay and the new Gear S2 Smartwatch -- the new smartphones were pegged as an early competitor for Apple's iPhone 6s and iPhone 6s Plus.

But, if the analysts' predictions today are correct, Samsung saw most of its profits from its contribution to chip production within Apple's own smartphone line-up. When initially discovered a few days after the launch of the iPhone 6s and iPhone 6s Plus, the split of A9 chips between Samsung and TSMC met a small wave of controversy, with one iOS developer going so far as to calculate the percentage split between the two manufacturers. Even though the 60/40 percentage was in favor of TSMC, it appears Samsung's chip manufacturing for the 6s and 6s Plus was enough to help in some way boost its overall quarterly growth.

Article Link: Samsung Estimates First Profit Growth in Two Years Thanks to Sales of Chips, Not Hardware

 

[CEmajr]

This is likely the norm for them going forward. Better at manufacturing chips than making mobile devices. Apple likely prefers them to be this way as well. I don't think their smartphone business will ever get back to where it was 2012-2013.

 

[Fondaparinux]

Samsung made money because of iPhones.

That is a terrible thing to tell investors.

 

[AngerDanger]

The iPhone is Samsung's biggest moneymaker. They're just that good at copying Apple.

 

[Tubamajuba]

Samsung made money because of iPhones.

That is a terrible thing to tell investors.

Not necessarily... remember, investors care about their money, not fanboy smartphone wars. Samsung is producing quality components for a popular device and making a good chunk of change in the process... all seems to be well for them. Sure, there's always the threat of Apple going 100% TSMC, but judging by their willingness to dual-source, I don't think that's a huge concern.

 

[JaySoul]

Put me in charge of Samsung and I'd:

- cut 80% of their stupidly massive phone/tablet range
- focus on chips (for others e.g. Apple and their own Exynos which are FANTASTIC, why go back to SnapDragon??)
- more targetted advertising
- focus on ChromeBooks

I like that Samsung make so many moonshots with their tech but they waste SO much money.

PS - I actually have a Samsung fridge and it's very nice.

 

[Tsuius]

Isn't chips hardware?

 

[koulmj]

The iPhone is Samsung's biggest moneymaker. They're just that good at copying Apple.

I actually really like the frame of the phines, screen, and feel of the Galaxy s6. ..i just deteste the way Android works with documents and OSX.

 

[djgamble]

Samsung made money because of iPhones.

That is a terrible thing to tell investors.

Which is why I wonder why they keep stabbing the golden goose.

So much irony in Same-song selling more phones than Apple, losing money doing so and then making up for it by selling chips to Apple.

Now if they'd been nicer... they'd be providing more than double the amount of chips to Apple. Instead, Apple, funding their rivals and trying their best to slowly move away from Same-song chips.

 

[H2SO4]

Samsung made money because of iPhones.

That is a terrible thing to tell investors.

As opposed to, Apple made good iPhones because they had solid Samsung components upon which to build?
Man get over yourself.

 

[rmatthewware]

Ha Ha!

 

[AtheistP3ace]

Honestly surprises me. I thought their galaxy phones did well.

 

[rmatthewware]

As opposed to, Apple made good iPhones because they had solid Samsung components upon which to build?
Man get over yourself.

Samsung may have built the chips, but the A-line has been designed by Apple. Saying it's strictly a Samsung component is like saying a canvas-maker should get credit for Monet "building" his painting on their solid component.

 

[H2SO4]

Samsung may have built the chips, but the A-line has been designed by Apple. Saying it's strictly a Samsung component is like saying a canvas-maker should get credit for Monet "building" his painting on their solid component.

I was being facetious. But yes.
Having said that, I could design a car that does 1000mph. Without the hardware to test it I’d be nowhere.
Both companies need each other as one cannot be all things to all people.

 

[wlossw]

It's good for Apple that Samsung is successful and continues to provide new and better components for future apple products. After all, Samsung continues to provide some of the most advanced components across the range of Apple products, including screens, solid state storage and cpus. In all these cases the Samsung parts are superior to the alternate vendor. As an Apple enthusiast, I hope Samsung continues to push forward across the board in improving their products and manufacturing prowess and is financially successful in doing so.

 

[JaySoul]

Honestly surprises me. I thought their galaxy phones did well.

I think the S6 did do well, I certainly see it everywhere. The problem is that they just have so many phones, it's bewildering.

It's one thing to offer a choice, but Samsung just greenlight every idea, it's silly.

 

[koulmj]

Honestly surprises me. I thought their galaxy phones did well.

Maybe they do sell well and just have a crappy profit margin compared to a single chip which requires almost no support and way less marketing/distro/so fourth. It's hard to say how a company is doing based on just profit.

...I know plenty of people with Galaxy phones...I wonder what the "REAL" number of s6 vs. 6s or 6s+ users are...

 

[samcraig]

A little misleading headline. Both the hardware parts AND phones contributed to the profit growth. Perhaps they mean that the majority of the profit came from chips/screens.

Also - Apple isn't their only customer. And it's a very nice symbiotic relationship. It's not accurate to say that Apple can do just fine without Samsung. And that Samsung NEEDS Apple.

 

[2457282]

Eventually, Samsung will have to split its divisions into separate companies that can be more focused. Taking profits from chip making and using it support the phone business may seem okay, but long term that can hurt R&D and their ability to stay ahead in the foundry where they are way ahead of everyone. The reality is that no matter how good their phones are from a hardware perspective they are limited by Android and all the others in the market. They will never be able to drive significant profits like apple because of this limitation. Splitting the company up and allowing the phones to compete at the commodity level could prove more profitable for both the foundry and the phone. But a company that also makes vacuum cleaners, refrigerators, stoves, TVs, etc is just not focused enough to be successful long term. THe days of the huge conglomerates that do everything has passed. Huge but focused companies are working much better these days.

 

[Andres Cantu]

And people don't believe me when I say that demand for Samsung phones is down...

 

[CEmajr]

Maybe they do sell well and just have a crappy profit margin compared to a single chip which requires almost no support and way less marketing/distro/so fourth. It's hard to say how a company is doing based on just profit.

...I know plenty of people with Galaxy phones...I wonder what the "REAL" number of s6 vs. 6s or 6s+ users are...

Its not really close. You have to remember Apple usually sells almost as many Iphones as Samsung does total phones, which includes tons of low and mid end models. The fact that they aren't generating much profit from phones shows that it's the cheaper devices that are making up the bulk of their sales volume rather than things like the S6 and Note line.

 

[iOSFangirl6001]

This is likely the norm for them going forward. Better at manufacturing chips than making mobile devices. Apple likely prefers them to be this way as well. I don't think their smartphone business will ever get back to where it was 2012-2013.

Here lies Samsung's 2012-2013 smartphone business. Samsung fanboys knew him well. May he forever rest in pieces as he fades into obscurity
*insert fanbase moment of silence then bugel playing then fanboys tearing up the comments section *

Isn't chips hardware?

Technically yes but in this case they meant phones as a whole entire piece of hardware

 

[AtheistP3ace]

Maybe they do sell well and just have a crappy profit margin compared to a single chip which requires almost no support and way less marketing/distro/so fourth. It's hard to say how a company is doing based on just profit.

...I know plenty of people with Galaxy phones...I wonder what the "REAL" number of s6 vs. 6s or 6s+ users are...

Thats a good point actually. I suppose a phone does need more support than a chip once the design is complete.

 

[brendu]

Samsung made money because of iPhones.

That is a terrible thing to tell investors.

Why? All investors care about is that Samsung made money.

 

[surfingarbo]

PS - I actually have a Samsung fridge and it's very nice.

Yes, but does it toast bread also?