Chips left Samsung Electronics' Q2 earnings

http://www.koreatimes.co.kr/www/news/tech/2015/07/133_183872.html

By Yoon Sung-won

Samsung Electronics' semiconductor business has recorded its largest operating profit in five years, leading the company's recovery from last year's slump.

The nation's leading electronics maker said in its regulatory filing that it posted 6.9 trillion won ($5.96 billion) in operating profit in the second quarter, up 15 percent from the previous quarter's 5.98 trillion won. Its sales stood at 48.54 trillion won, a 3 percent increase from 47.12 trillion won in the first quarter.

The company's semiconductor business was at the forefront of the better performance with 3.4 trillion won in operating profit and 11.29 trillion won in sales.

"Sales increases in high-capacity products and high value-added ones for mobile devices and servers have led the performance in the memory chip segment," Samsung Electronics Investor Relations Executive Director Lee Myung-jin said during a conference call Thursday.

"In the system large-scale integrated circuit (LSI) segment, sales increases in smartphone parts, such as 14-nano mobile application processors, and high value-added LSI products, such as high-resolution image sensors, and display drive integrated circuits for flexible panels have led the growth."

In the third quarter, the company said its DRAM and NAND Flash memory chip production will see more than 10 percent growth.

"In the DRAM segment, we will work to meet the expanding demand for DDR4 and LPDDR4 products for high-end smartphones and servers and speeding up the conversion to 20-nano process," said Baek Ji-ho, a senior executive of Samsung Electronics' mobile business division.

"As the demand of NAND Flash products for mobile storage and solid-state drives is expected to grow, we will increase the VNAND supply and improve cost competitiveness by converting to 10-nano process."

Baek also showed confidence in future competition in the VNAND sector.

"We will be able to roll out the third-generation VNAND products in October at the latest and we will not lag behind any other products in cost competitiveness," he said.

"It is possible to ramp up third-generation VNAND production earlier to meet demands from enterprises and data centers if needed."

Samsung Electronics' system LSI business division vice president, Hong Kyu-sik, said: "We expect the 14-nano foundry sales will increase in the latter half while the overall performance is also likely to increase on the back of expanding demand for high-resolution image sensors and the company's entrance to the Chinese mobile device market."

Mobile sector fails to rebound

The IT and Mobile Communication (IM) business division, which has been the major income generator for Samsung Electronics, could not break the stagnation despite the launch of the Galaxy S6 and S6 Edge.

Despite the lower-than-expected popularity of the S6, that of the S6 Edge has far exceeded the company's expectations, creating a supply shortage.

The company's budget handset sales were also hit hard by aggressive marketing drives by Chinese brands, affecting the overall performance of the mobile segment.

"Our smartphone shipments have recorded minus growth due to the decreased sales of budget handsets," said Park Jin-young, Samsung Electronics' mobile business division executive. "The S6 Edge has showed higher-than-expected market demand, which led to a shortage in supply and an increase in marketing expenses."

The company said it will introduce an "elastic" price policy for the S6 and S6 Edge while rolling out new large-screen premium handsets and budget models to boost market competitiveness.

The company said it will sell the curved display panels, which have been used for Galaxy Note 4 and Galaxy S6 Edge, to other smartphone manufacturers.

In the consumer electronics segment, Samsung Electronics said it will continue to focus on super ultra-high-definition (SUHD) televisions and it plans to expand the application of the latest display technologies to cheaper models.

The company said it invested 13.2 trillion won establishing facilities in the first half, up 30 percent from last year, to secure future growth engines.

It also said its board of directors had decided to provide a 1,000 won mid-term dividend per share, which is double the amount of last year.

Samsung Electronics closed at 1,215,000 won on the Seoul bourse, down 3.8 percent from a day ago on concerns of delayed recovery.