Samsung said it’s expecting its quarterly operating profit to surge by a fifth due to sales from its chip unit that powers data centers and gains in production.
Industry analysts expect that the July-September quarter will mark a peak in earnings for the South Korean technology giant. This is because sharp price slides for some types of semiconductors have brought an end to a two-year super cycle of tight supply and soaring demand.
The world’s largest maker of memory chips and smartphones today said preliminary estimate showed third-quarter profit jumped 20.4 percent to 17.5 trillion won or $15.5 billion on a 4.8 percent gain in revenue.
That would beat operating profit growth of 6 percent in the previous quarter when its Galaxy S9 device missed sales targets and competition from cheaper Chinese-made phones ate into margins for its mobile business, Reuters reported.
The firm will disclose detailed earnings in late October.
Chips account for nearly 80 percent of Samsung’s operating profit and Samsung benefited from a surge in data centers for cloud computing that has spurred spikes in prices for DRAM chips. DRAM chips, which help devices perform multiple tasks, are its main memory product.
It has also made gains in production technology that allow it to make smaller and faster chips per silicon wafer.
Prices for NAND chips used for longer-term data storage have tumbled as supply swamps demand, and prices for DRAM are expected to follow suit.
Song Myung-sup, a senior analyst at HI Investment & Securities, expects DRAM chip prices to slide about 5 percent in the fourth quarter from the previous quarter, while NAND chip prices are seen dropping 10 percent.
Analysts expect Samsung’s mobile business will struggle to deliver profit growth for the next two quarters due to marketing costs in the premium smartphone segment and competition from cheaper Chinese-made models.
Samsung is working on bringing phones with bendable screens to market but they are not expected to become a huge profit driver.