Samsung posts record profit on strong chip sales

SAN FRANCISCO—South Korea's Samsung Electronics Co. Ltd. reported a record operating profit of 5.01 trillion Korean won ($4.23 billion) on revenue of 37.89 trillion won ($31.9 billion) for the second quarter, with strong semiconductor and LCD sales setting the pace.

Overall sales for Samsung improved by 17 percent compared to the second quarter of 2009, the company said. Second quarter net income was 4.28 trillion won ($3.6 billion), Samsung said.

Samsung's 5.01 trillion won operating profit, which eclipsed the company record set in the first quarter, was up 88 percent year-to-year, Samsung said.

Samsung (Seoul, South Korea) credited significant improvements in its components businesses for driving increased profitability. The company said its semiconductor business recorded an operating profit of 2.94 trillion won ($2.48 billion) on revenue of 9.53 trillion won ($8 billion), while its LCD business lodged a profit of 880 billion won ($741.5 million) on 7.76 trillion won ($6.5 billion) in sales.

"In the second quarter, our component businesses performed very strongly, yet it was a more challenging quarter for our set businesses,” said Robert Yi, Samsung vice president and head of investor relations, in a statement. "With intensified competition throughout the digital media and mobile industries going forward, it may become a challenge to maintain current profitability levels."

Samsung predicted that strong seasonal demand for core components would drive its performance in the third quarter, but warned that increased market supply of components is also expected. The company forecasts that continued price competition in its set businesses will put downward pressure on profit margins in the third quarter.

Samsung said total capital expenditures for the first half of the year reached 9.2 trillion won ($7.8 billion), representing 51 percent of its total 18.2 trillion won in capex planned for 2010.

Samsung also announced that total capital expenditures for the first half of 2010 reached 9.2 trillion won, representing 51 percent of the total of 18.2 trillion won in capex planned for 2010.

Second quarter profit margin for its semiconductor business was 30.8 percent, Samsung said, while the LCD business achieved a profit margin of 11.3 percent. Semiconductor operating profit of 2.94 trillion won improved by 765 percent compared to the year ago quarter, Samsung said.

The semiconductor business was boosted once again in the second quarter by Samsung's memory division, which notched sales of 6.71 trillion won ($5.7 billion), up 74 percent versus the second quarter of 2009, Samsung said. Strong DRAM demand was driven by a mid 20-percent increase in PC shipments and more than 30-percent rise in gigabytes per system year-on-year, Samsung said. In NAND, despite weak seasonality, demand remained steady due to strong sales of mobile devices, including smartphones and tablet PCs, Samsung said. The company cited accelerated migration to 40-nm-class DRAM and expanding 30-nm-class NAND for the enhanced profitability.  

In the third quarter, the demand for DRAM is expected to rise due to strong seasonality and increased demand for high-capacity NAND is also expected, Samsung said.

Samsung said its telecommunications businesses posted a second quarter operating profit of 630 billion won on revenue of 8.78 trillion won, paced by a 22 percent year-to-year increase in handset sales to 63.8 million units.

Samsung reported that it sold more than 500,000 3-D TVs in the third quarter and claimed the market share lead in the category.