Samsung Electronics announced earlier this week that its operating profits for the third quarter would reach $6.29 billion. That’s a staggering rise of 80% year-over-year –far exceeding Wall Street expectations of about $5.89 billion.
This is welcome news for Samsung, a company that just last quarter saw operating profits fall 4% from the same period the year before.
So, what happened? Where did all these dollar signs suddenly come from?
Most of the rise in profits is coming from smartphones –Apple smartphones not Samsung.
The big jump in the third quarter is largely credited to the company’s semiconductors division, and that’s due to all the Samsung chips Apple puts in its iPhone 6 line of phones.
Along with the processors the company puts in its own phones, Samsung’s chip revenues grew by 24% to about $28 billion last year.
Analysts estimate that profits from the chip unit accounted for roughly half of the company’s third-quarter profit.
The company has also been killing it in their screens division, where they make them for televisions and phones for a wide array of companies including the company’s Chinese smartphone competitors. Couple that with a weak Korean currency and analysts estimate that may have added as much as $260 million to operating profits.
Smartphone woes continue
That’s not to say that all is a party in the corridors and cubicles at Samsung –the smartphone division remains a concern as it continues to suffer on the high-end with Apple and at the low-end with up-and-coming Chinese competitors.
Fortunately for the company, with its interests spread across several industries, it is able to withstand weakness in one division with strong performances in others.
“There were worries that overall earnings will continue falling as mobile profits declined, but now the numbers make the case that Samsung has the capacity to withstand weakness from the mobile business,” said IBK Securities analyst Lee Seung-woo.
Though they might not stay it out loud, Samsung can’t help but be happy with arch-rival Apple’s iPhone success.