Employees of Samsung Electronics work on a production line at a factory in Suwon. Photo: AFP/Choi Jae-ku
Employees of Samsung Electronics work on a production line at a factory in Suwon. Photo: AFP / Choi Jae-ku

South Korean flagship Samsung Electronics posted record third-quarter operating profit on Wednesday, but suffered from weak smartphone sales, while the end of a two-year boom in memory chip prices is likely to impact figures in the fourth quarter and next year.

In a disclosure on its website, the firm said it recorded 13.5 trillion won (US$11.5 billion) of net profits in the third quarter of this year – up 18% year on year. That was a record high over the previous highest number – 12.25 trillion won in the fourth quarter of 2017.

Operating profits were 17.57 trillion won, up 21% from the year prior, while revenue rose to 65.6 trillion won in the quarter. The figures were broadly in line with market expectations. The numbers were driven by hefty sales of displays and memory chips.

Smartphone sales, however, were pallid: Samsung’s handset division suffered a 10% revenue drop, year-on-year. Samsung attributed it to increased marketing and currency fluctuation costs.

With the market flooded with cheaper Chinese handsets, Samsung’s top-end Galaxy line has taken a hit. Much now depends on how the market reacts to the highly anticipated folding screen smartphone which Samsung has announced will hit the market next year.

The company suggested a grim outlook for the fourth quarter due to falling memory chip prices. Further price drops are expected next year, which would kill off a two-year price boom in the sector.

Given the sectoral outlook, Samsung, one of the world’s biggest buyers of chip-making equipment, said it had cut its capital spending this year by 27% to 31.8 trillion won, from last year’s record 43.4 trillion won.

And at year’s end, Samsung said it expects a customary seasonal rise in marketing spend to be a drag on profits in the last quarter.

Samsung’s shares this year have dropped approximately 17%.