Samsung profits jump in 3Q on successful differentiation strategy

Samsung Electronics today announced its net profits in the third quarter jumped 45% sequentially and 16% on year to 2.19 trillion won (US$2.25 billion), with revenues of 15.22 trillion won and operating profits of 1.85 trillion won.

"Our strategy of producing high performance, differentiated products into multiple end markets allowed us to power ahead and deliver solid third quarter results amid a challenging market environment of the information-technology sector," said Woosik Chu, senior vice president and head of Samsung‘s investor-relations team.

"We anticipate our key business units to experience significant tailwinds in the fourth quarter, a seasonally strong period. Furthermore, our plan to invest an additional 1 trillion won to increase capacity of our memory-chip business is expected to create revenue opportunities next year," Chu said.

Operating profits of Samsung‘s semiconductor business reached 1.27 trillion won on revenue of 4.91 trillion won in the third quarter. The operating profits increased 29.5% in the third quarter from the second quarter mainly due to strong demand of memory chips from the PC sector.

In the memory-chip business, Samsung capitalized on the global shortage in the supply of DRAM chips that subsequently led to a surge in DRAM prices. A timely redeployment of production from slower-growth products and strengthening higher-growth premium products such as DDR2 were the major reasons for the profit growth.

The memory business is expected to see further growth and higher returns in the fourth quarter, a seasonally strong period. The price of DRAM chips is expected to remain strong in the fourth quarter, and the demand of NAND flash memory chips is expected to grow with the introduction of new products that require larger memory such as MP3 players, PMPs (portable multimedia players) and handsets.

In addition, migration to advanced process technology, in particular 60nm 8 GB NAND flash technology, is expected to reduce manufacturing costs and improve profitability. Samsung‘s plan to invest an additional one trillion won to increase capacity of memory chips is expected to create revenue opportunities next year.

Samsung‘s telecommunication network business posted revenue of 4.71 trillion won and operating profits of 520 billion won.

In the third quarter, robust sales of the "Ultra Edition" premium handsets in Europe helped boost sales to a record 30.7 million units and double-digit margin of 11.1%.

In the fourth-quarter, the pace of the demand increase is expected to accelerate, as the overall 3G market grows and demand for replacement rises. The company expects both the volume of sales and ASP (average selling price) to see significant improvement with the launching of 3G "Ultra Edition" handsets in various form factors and multimedia handsets.

The company‘s LCD business reported revenues and operating profits of 2.996 trillion won and 160 billion won, respectively. Prices of PC-use panels recovered ahead of the seasonally-robust period and sales of 40-inch-and-larger TV panels remained strong.

Demand for LCD TV panels dominated the industry dynamics. Samsung sold three million units of LCD TV panels, of which sales of 40-inch-and-larger TV panels amounted to 1.6 million units.

Samsung plans to boost the monthly capacity of its seventh-generation (7G) LCD production to 150,000 units in the fourth-quarter.

Samsung‘s digital media business posted operating losses of 100 billion won on revenue of 1.64 trillion won. However, sales of LCD TVs, PDP (plasma display panel) TVs and other high-end flat-panel TVs still helped generate profits.