April 25, 2024

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[THE INVESTOR] Samsung Electronics said on Oct. 31 that it posted a record operating profit of 17.57 trillion won (US$15.40 billion) in the July-September period, up by 3 trillion won from a year earlier, thanks mainly to its robust DRAM chip business.

The tech giant forecast that its DRAM business will remain on an upward trajectory in the long term although the market could experience price fluctuations in the coming months.

“A temporary imbalance between supply and demand could take place, but DRAM sales will gain further momentum down the road, considering the growth of new technologies, like artificial intelligence and 5G,” an executive from the company said in a conference call.

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The company’s semiconductor business was the largest contributor to the improved earnings as it accounted for nearly 80 percent of the tech giant’s entire operating income.

The chip business saw its operating income jump 37 percent on-year to 13.65 trillion won in the third quarter with its quarterly sales standing at 24.77 trillion won.

Samsung said, however, the mobile OLED and smartphone segments will become more competitive as more players will enter the flexible OLED display sector and roll out high-performing and affordable phones.

According to the third-quarter earnings results, the revenue came in at 65.46 trillion won, up by 5 percent from the same period last year. It is the second-highest after 65.98 trillion won the tech giant recorded in the fourth quarter of 2017. The display business division earned 1.1 trillion won in the three-month period, up from 0.97 trillion won in the same period last year, while the smartphone division made an operating profit of 2.22 trillion won, down from 3.29 trillion won a year earlier

The tech firm explained that high demand for 64-layer 3D V-NAND flash memory chips and 10-nanometer-class DRAM chips drove profits.

It forecast an excessive supply in the 3D NAND flash market could cause flash memory chip prices to drop in the fourth quarter, but demand will gradually increase next year.

The DRAM segment will see stable demand in the coming months despite slight price declines due to inventory corrections.

Demand for image sensors, thanks to increasing adoption of multiple camera modules in top-tier smartphones, is expected to increase next year, according to the firm.

Samsung said it would continue to diversify its customers for 5G network equipment, while developing advanced 3D sensing solutions and under-display fingerprint sensors for smartphones.

On the display front, Samsung said it would try to broaden the customer base with high-end products like quantum dot and 8K displays, while rolling out new products, such as foldable panels and displays for vehicles.

The Korea firm is expected to showcase its first foldable smartphone at a developer conference scheduled to be held on Nov. 7-8 in San Francisco.

As for the smartphone business, Samsung plans to deploy differentiated features in mid-range and low-end smartphones as well as launch 5G-enabled and foldable smartphones.

The following are excerpts from the Q&A session during the conference call.

Q. What is your forecast for the DRAM market in the fourth quarter and next year?

A. In the fourth quarter this year and the first quarter next year, the market could slow down a bit due to seasonal factors, but from the second quarter next year, demand for DRAM will be quite strong thanks to the growing server segment. We will roll out new products as well, including a CPU platform and a 16GB DDR chip.

A temporary imbalance between supply and demand could take place, but the DRAM sales will gain more momentum down the road, considering the growth of new technologies like AI and 5G.

Q. Will there be any changes in the plan to cancel 50 percent of treasury bonds this year?

A. We will stick to the initial plan to cancel 50 percent of the treasury bonds within this year.

Q. What are the highlights of the planned foldable smartphone and when will it hit the shelves?

A. With the new form factor, the foldable smartphone will embrace both portability and a large screen size. It is a smartphone, but becomes a table PC when unfolded. Samsung will try to talk with developers to optimize applications for the new phone, and unveil the details, like the UI and UX, during the developer conference scheduled in November.

Q. What are your preparations for 5G?

A. There will be many changes required for mobile devices with a high resolution display, high-performing chips and large storage with commercialization of the 5G network. Samsung is working on every aspect of the 5G tech, including security, high-speed network equipment and low latency technology. We are also developing 5G modems tailored for each global market.

Q. What is the investment plan for the semiconductor business in 2019?

A. Samsung will stick to the existing plan to extend production lines at its Pyeongtaek Plant 2 this year. Although no decision has been made yet, the company will likely switch some of its existing lines, such as Line 16 for NAND flash memory, into ones that produce DRAM chips. We will achieve growth and efficiency not only by building new lines but also by upgrading the existing facilities.

Q. Are there any changes to your shareholder returns policy?

A. Samsung may start to review its three-year shareholder policy, effective through 2020, next year. It will then consider to offer extra returns to shareholders in addition to 9.6 trillion won given per year from 2018 to 2020.

Q. Do you have any plans to roll out QD-OLED TVs?

A. Although Samsung is running an R&D project for the QD-OLED technology, it will take a two-track strategy by putting focus on the current QLED lineup, and self-luminous Micro LED products that offer nearly perfect black levels.

By Kim Young-won (wone0102@heraldcorp.com)