The Strategist

Samsung is optimistic despite of losses

07/31/2018 - 15:37

The company's profit decreased for the first time in 7 quarters. However, the South Korean company is still optimistic and hopes for stability in the production of semiconductors.

Samsung Electronics published an optimistic forecast for the coming months, citing the strong chip business. The forecast is somehow contrary to the fact that the technology giant reported its first decline in profits for 7 quarters against the backdrop of weak sales of its flagship smart phones.

Semiconductors remained the main revenue driver for Samsung, generating more than 80% of operating profit. Operating profit of the division increased to $ 10.4 billion in the II quarter. A two-year stable demand amid a two-year strong global demand for memory chips has ensured the growth.

Samsung said that the semiconductor forecast remains strong due to stable demand for servers and the production of mobile phones. The global memory chip industry has grown since the second half of 2016 amid rising demand and limited supply.

The net profit of the South Korean company was $ 9.8 billion. The decrease was 5.5% compared to the previous quarter. Sales decreased by 4% year on year.

In its announcement, the company said that stability in the memory market and the growing demand for flexible organic LED panels (OLED) will stimulate revenue growth in the second half of the year.

"I think that the decline in profits was temporary and once again the company will report on record revenues in the third quarter, and this trend will continue next year," commented Daniel Mcgill, analyst of Macquarie, "Although there are some disagreements about the semiconductor cycle, the boom of memory chips will continue next year due to strong demand from data centers."

However, other analysts believe that it will be difficult for Samsung to maintain revenue dynamics next year. Experts refer to the slowdown in smart phone sales and signs of a decline in the chip industry. They expect that the semiconductor cycle will decrease because of the excess capacity in the next year.