Samsung forgets Galaxy worries, surprises analysts with big numbers

Internal ding-dong between phones and chips continues

Samsung Galaxy S6

Despite the Galaxy 6 and its kin – Plus, Edge, Edge Plus – tanking, Samsung Electronics has posted impressive numbers for the third quarter, substantially higher than analysts had predicted, leading to a jump in the share price.

The Korean tech giant has forecast profit for July, August and September will be 7.3tn won (£4.1bn), as opposed to 4.1tn won (£2.3bn) in the same quarter last year, and 6.9tn won (£3.9bn) in the second quarter of this year.

The numbers are more than eight per cent higher than analysts had forecast, which saw a surge in the Samsung Electronics share price, closing up 8.7 per cent on the Korea Composite Stock Price Index (KOSPI).

A lot of the growth has come from making chips and screens for other companies. Despite the courtroom battles, Samsung is still a major supplier for Apple, which buys its processor chips from both Samsung and TSMC.

The Samsung manufactured APL0898 chip is physically smaller than the TMSC APL1022, which may reflect the use of the same 14nm FinFET process that Samsung Electronics uses for the Exynos 7420, featured in the Galaxy S6 family.

The internal schism between components and phones is magnified by Samsung Electronics starting to sell the Exynos 7420 to other handset manufacturers and saying it was prepared to do the same with the distinctive curved edge screen.

In day to day usability the curve adds nothing to the phone, it’s not a big enough area to provide side buttons as it does on the Note Edge, but in an age where all mobes are black rectangles, it’s a strong identifying feature.

Samsung’s mobile phones are not just fighting a battle against Apple, but against an increasing number of Chinese manufacturers, not least Oppo and Xiaomi, which are growing rapidly. This is the class of customer which the components business is explicitly targeting. How the company prioritises its use of leading edge components is an interesting strategic challenge, but at least this is one the company can control.

Currency movements are outside Samsung’s area of influence and are another reason for the gap between the parts of the electronics business. A weak won benefited components but had little effect on handsets, where pricing is all done in dollars.

With the Christmas quarter being the strongest for handset sales it will be interesting to see how the internal balance pans out between now and in the new year. ®




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