Samsung Electronics posts record Q3 profits, replaces CEOs

Agence France-Presse

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Samsung Electronics posts record Q3 profits, replaces CEOs

AFP

(UPDATED) This is despite the company facing the jailing of its de facto leader for bribery and a recall of its flagship device

SEOUL, South Korea (UPDATED) – Samsung Electronics logged Tuesday, October 31, a record profit of $10.0 billion for July to September and announced a sweeping reshuffle within top management as the South Korean tech giant seeks to maintain its market lead while its heir is in prison.  

The world’s biggest memory chip and smartphone maker has faced multiple challenges since last year, including a humiliating recall of its flagship Galaxy Note 7 handsets and a corruption scandal that engulfed its de facto leader.

But its third-quarter net profits soared 148% on the same period a year ago, it said in a statement, thanks to strong demand for its memory chips and a recovery in smartphone sales with the roll-out of the new generation Galaxy Note 8.

The figures come only two weeks after chief executive Kwon Oh-Hyun resigned, saying the South’s biggest firm was facing an “unprecedented crisis” and its current profitability was “merely a fruit of decisions and investment made in the past”.

The firm described Tuesday’s numbers as an “overall robust performance”.

Operating profit nearly tripled on-year to 14.5 trillion won – also a quarterly record – it said in a regulatory filing, while sales surged to 62.05 trillion won, another all-time high. 

Samsung Electronics is the key subsidiary of the sprawling Samsung Group, whose heir Lee Jae-Yong was found guilty in August of bribery, perjury and other charges stemming from payments to the secret confidante of ousted president Park Geun-Hye.

Lee, who was jailed for 5 years, says he is innocent and is appealing.

The firm also announced Tuesday the first major reshuffle in its top leadership in three years. It had not made any radical changes at the top since group chairman Lee Kun-Hee suffered a heart attack in 2014 that left him bedridden. 

Samsung, which has a team of 3 CEOs each leading its semiconductor, mobile and TV units, said Kwon’s role as the head of the semiconductor business would be taken by Kim Ki-Nam, a younger manager in chipmaking operations. 

Lee Sang-Hoon, known to be close to the group’s founding Lee family, will leave his position as the firm’s chief financial officer to take the chairmanship of the board, a role previously held by Kwon.

Tuesday’s announcement also saw HS Kim replacing Yoon Boo-Geun as the head of Samsung’s home appliance and TV unit, and DJ Koh replacing JK Shin as the mobile chief. 

The 2017 Galaxy Note 7 recall – due to exploding batteries – also dealt the firm a crippling blow to its mobile business.

But its profits and share price have rocketed this year, as global chip prices have soared with suppliers such as Samsung yet to catch up booming demand for high-powered processors used in handsets, computers and cloud storage servers. 

The firm provides memory chips for PCs, servers and mobile gadgets of its own but also industry rivals including Apple, with that “component business” helping the firm cushion a fall in sales of its own devices.

It said separately it would double its dividends in 2018, and confirmed a further share buyback for the fourth quarter.

‘Longer-term horizon’

Samsung has sustained and widened its lead in the market partly by investing massively in building and expanding semiconductor factories, often faster than its rivals.

Its investment in infrastructure, mostly on chip plants, will reach a whopping 46.2 trillion won just for this year, compared to 25.5 trillion won in 2016, it said.

The firm operates the world’s biggest semiconductor plant in the city of Pyeongtaek, 70 kilometers (44 miles) south of Seoul, and is upgrading or expanding many of its production lines there and elsewhere. 

Such aggressive investment has stoked concerns that its increased supplies may drive down prices and eventually dent the firm’s own profits in subsequent quarters.

But senior vice-president Chun Se-Won told a conference call: “We are looking at a longer-term horizon… with a goal of boosting our business capabilities for the next two or three years and beyond.” 

Samsung shares rose 2% to 2.75 million won apiece in mid-afternoon trading on the Seoul stock market. 

Kim Yang-Jae, analyst at KTB Investment & Securities, said profits would rise further in the fourth quarter, with global semiconductor prices continuing to rise into next year.

“Samsung’s display unit would also see profits grow as it supplies panels to Apple’s iPhone X,” Kim said, forecasting a new record operating profit of 15 trillion won in the fourth quarter.  

Samsung predicted “positive growth” in the semiconductor business next year as technological advances in artificial intelligence (AI) and machine learning fanned demand for high-powered processor chips. – Rappler.com

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