A visitor looks at a Samsung Galaxy Fold smartphone at a showroom in Seoul on September 6. Photo: AFP / Jung Yeon-je

Samsung announced on Friday that its third-quarter operating profits would be about 7.7 trillion won ($6.49 billion) – a 56% fall from 17.57 trillion won in the same quarter last year.

That would mark the fourth consecutive quarterly drop – but even so, it is better than the market consensus of around 7 trillion won. It would also be a quarter-on-quarter recovery of 16.67% – up from 6.6 trillion won in the second quarter.

Revenue is estimated to post 62 trillion won, a 5.3% drop on-year from 65.46 trillion won in the same quarter last year. But it would still be an increase of about 10.5% from 56.13 trillion won in the second quarter of 2019.

“The IT and Mobile Communications division of Samsung performed better than in the second quarter as high-end smartphones, including Galaxy Note 10 launched in August, are selling well,” an industry insider told Asia Times. “The base effect also affected the division’s earnings as its second-quarter earnings were abysmal.

“The display business also improved as high-resolution Organic Light-Emitting Diodes (OLED) display orders from Apple for the new iPhone increased,” the source added. “These businesses helped earnings to recover.”

Kim Yang-jae, an industry analyst of KTB Investment & Securities, estimated that Samsung’s third-quarter operating profits from the IT and Mobile Communications division and the display business would increase to 2.5 trillion won and 1.2 trillion won, respectively, from 1.6 trillion won and 700 billion won in the second quarter.

However, despite an increase in DRAM shipments, the earnings of Samsung’s flagship semiconductor division are expected to be about 3.3 trillion won – the same as the second quarter, as DRAM prices keep falling, Kim said.

Chip prices low

While chip prices remained low, shipments had actually increased due to sector jitters.

“Japan tightened export regulation of key semiconductor materials to Korea spurred DRAM demand temporarily in the third quarter on worries about possible DRAM supply,” Kim told Asia Times.

The industry insider forecast that DRAM prices would not recover in this year as demand from major customers such as the server makers have yet to revive.

Kim predicted that Samsung’s fourth-quarter earnings would fall back to around 7 trillion won in the fourth quarter and rebound next year.

“Amid DRAM prices marginally falling, customers increased DRAM orders in advance during the third quarter due to uncertainties in Korea-Japan relations,” Kim said. “This could be a burden on fourth-quarter earnings.”

He also pointed out that Samsung’s investment to transform the low-end LCD display production line to OLED manufacturing facilities, which cost about half a trillion won, could be another burden on Samsung’s fourth-quarter earnings.

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