SAN FRANCISCO — South Korea's Samsung Electronics nearly tripled its third-quarter profit, largely on the strength of $17.8 billion in chip sales, a company record for any quarter.
Growth in semiconductor profit offset profit sequential declines in Samsung's mobile handset and display businesses.
The semiconductor business accounted for $8.9 billion of Samsung's $12.9 billion in profit, as sales of memory chips enjoyed widespread strength across all applications, especially high-performance memory chipsets for servers.
Samsung, the largest seller of memory chips worldwide, is all but certain to pass Intel to become the No. 1 chip vendor globally in 2017. Samsung's $17.8 billion in third quarter chip sales compares to about $16.1 billion for Intel.
Samsung's record-setting 2017 is being largely driven by a red hot memory chip market on pace to enjoy its largest annual growth in years. According to market research firm IC Insights, overall memory chip revenue is projected to grow by 58 percent in 2017, including a 72 percent increase for DRAM and a 44 percent increase for NAND. Samsung is the market leader in both segments.
Third quarter NAND sales were boosted by the launch of several flagship smartphones and expansion of cloud infrastructure, Samsung said, adding that the company actively responded to demand from value-added and high density markets such as datacenter NVMe SSD. For DRAM, the expansion of cloud services and the trend for higher density drove strong demand, Samsung said.
The supply of NAND is expected to remain tight in the fourth quarter, Samsung said. The company said it would pursue "a more profit-focused product mix" and said the trend toward high-performance, high-density mobile NAND is forecast to continue in 2018.
Samsung said it would expand its 1nxm process migration for DRAM in the fourth quarter amid expected high seasonal demand for mobile and PC and the continuing expansion of datacenter sales.
Samsung said its third quarter results were also boosted by strong sales or logic chips and foundry. But the company said weak seasonality for processors and image sensors is expected to dampen growth in the fourth quarter.
Foundry sales growth is also likely to be limited in the fourth quarter, Samsung said, though the company expects to diversify the 10nm node from mobile to cryptocurrency mining applications, while diversifying the customer base for new 8nm offerings.
Samsung said its mobile handset business saw strong shipments thanks to the launch of Galaxy Note 8 and solid sales of the new Galaxy J series, but its earnings declined sequentially due to the higher sales proportion of mass-market smartphones. The display panel segment posted an earnings decline despite expanded sales of flexible OLED panels for premium smartphones, the company said.
Overall, Samsung's third quarter sales grew to 62.05 trillion South Korean won (about $55.4 billion), up 30 percent from the third quarter of 2016. The company's profit increased to 14.53 trillion won (about $12.9 billion), up 261 percent compared to the year-ago quarter.
— Dylan McGrath is editor in chief of EE Times.