Posted on : Apr.8,2017 18:55 KST Modified on : Apr.8,2017 18:55 KST

A flag in front of Samsung Electronics headquarters in Seoul’s Seocho neighbourhood (by Park Jong-shik, staff photographer)

Strong performance driven by boom in semiconductor sector, sales of smartphones and televisions

Samsung Electronics carried on its surprisingly strong performance from the fourth quarter of 2016 into the first quarter of this year, with operating profits of nearly 10 trillion won.

LG Electronics also racked up its second highest-ever operating profits over the same period, after its historic high during the second quarter of 2009.

Samsung Electronics announced on Apr. 7 that its consolidated operating profits for the first quarter of 2017 had been tentatively estimated at 9.9 trillion won (US$8.7 billion). The number is more than 500 billion won (US$439.4 million) higher than the market forecast of 9.3702 trillion won (US$8.23 billion), marking an increase of 48.2% from the 6.68 trillion won (US$5.87 billion) in the first quarter of 2016 and 7.4% from the 9.22 trillion won (US$8.1 billion) last quarter. Historically, it is the company’s second-best quarterly performance after the 10.16 trillion won (US$8.93 billion) in operating profits for the third quarter of 2013.

In announcing its 4Q16 performance, Samsung Electronics had predicted that 1Q17 performance “may not be as good as the fourth quarter, since it’s a traditionally slow season.” Instead, performance only improved. While Samsung Electronics’s first quarter sales were down 6.2% to 50 trillion won (US$43.9 billion) from 53.33 trillion won (US$46.87 billion) the preceding quarter, they were up 0.4% from 49.78 trillion won (US$43.75 billion) during the same quarter in 2016.

At 19.8%, the first quarter operating profit ratio was up 6.5 percentage points from the same period last year – indicating that the company made a profit of 19.8 won (US$0.017) on over 100 won (US$0.088) in sales.

“Displays and set products like smartphones and televisions have been moving steadily, while market conditions for semiconductors have improved to an unprecedented degree,” Samsung Electronics explained.

Indeed, the semiconductor market has been enjoying a “super cycle” of long-term strong conditions since the second half of 2016 – with sales so brisk no items are available and sellers naming their own prices.

Securities company estimates put first quarter operating profits for Samsung Electronics’s semiconductor sector at close to 6 trillion won (US$5.3 billion), a huge leap from the 4.95 trillion won (US$4.35 billion) recorded in 4Q16. Smartphones also appear to have performed strongly in both sales and operating profits despite the loss of a new premium product with the discontinuation of the Galaxy Note 7, thanks to good results with the Galaxy S7 and Galaxy A5.

Expectations are even higher for Samsung Electronics’s second quarter performance, which is expected to be driven by the continued semiconductor boom and the Galaxy S8 smartphone, which goes on the market on Apr. 21. Second quarter operating profits could even reach close to 13 trillion won (US$11.4 billion) for the company, which could help propel it to annual operating profits of over 50 trillion won this year.

LG Electronics building in Seoul’s Yeouido neighbourhood

Meanwhile, LG Electronics announced on Apr. 7 that its consolidated first quarter sales had been provisionally calculated at 14.6605 trillion won (US$12.88 billion) and its operating profits at 921.5 billion won (US$809.9 million). The numbers are up 9.7% and 82.4% from the same period in 2016, respectively. The first quarter sales would mark a historic high, while the quarterly operating profits would be the second highest after the 1.2438 trillion won (US$1.09 billion) recorded in 2Q09. Analysts attributed the numbers to rising profits for home appliances and televisions thanks to a “premium” strategy and reduced smartphone losses due to project structure improvements.

By Kim Jae-seob, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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