Samsung profit beats estimates with demand rising for its chips and displays

Samsung Electronics Co. posted profit that beat analysts’ estimates as rising demand for memory chips and displays more than offset a slump in smartphones.

Operating income fell 31% to 5.9 trillion won ($5.4 billion) in the three months ended March, the Suwon, South Korea-based company said in a filing Tuesday. That compares with the 5.5 trillion won average of 36 analyst estimates compiled by Bloomberg. The shares rose.

Selling components to other vendors is helping Samsung weather a slide in the global smartphone market, where Apple Inc.’s new iPhones and inexpensive devices from Xiaomi Corp. are winning customers.

With earnings falling for six straight quarters, the company is counting on Friday’s debut of its new Galaxy S6 models to lure back buyers and drive sales of chips and displays.

“Robust sales of memory chips for mobile devices and servers contributed to the stronger-than-expected profit,” said Greg Roh, a Seoul-based analyst at HMC Investment Securities Co.

“Tighter marketing spending at mobile also contributed to the higher result and second-quarter results will be a lot higher, largely helped by S6 smartphones.”

Sales declined 12 percent to 47 trillion won in the quarter, the company said today. That compares with the 50.1 trillion-won average of 38 estimates.

The company’s shares rose 0.7 percent to 1,480,000 won as of 9:22 a.m. in Seoul. The stock has gained 12 percent this year after dropping 3.3 percent in 2014.

Samsung didn’t provide net income or details of divisional earnings. Audited results are scheduled for later this month.

Smartphone Sales

Operating income at the mobile unit probably fell to 2.3 trillion won on sales of 27.1 trillion won, according to the median estimate of five analysts surveyed by Bloomberg News.

Samsung probably shipped 81 million smartphones worldwide in the first three months of 2015, rising 7 percent from the fourth quarter, Daewoo Securities said in a March 27 report.

Despite slower sales of premium smartphones, demand for cheaper Galaxy models combined with reduced marketing expenses during the quarter probably helped slow the unit’s slide.

Samsung added $11 billion of market value in March after unveiling the Galaxy S6 and S6 Edge, with a multisided screen, at the start of the month. The new phones will be released initially in 20 countries from April 10.

Chip Demand

Earnings from the semiconductor unit, which supplies memory and processor chips to Apple and other mobile device makers, was about 2.7 trillion won in the first quarter on sales of 11.1 trillion won, according to the analyst survey.

Samsung’s use of its own processor chips in the S6, instead of those from Qualcomm Inc., is expected to help the System LSI unit post a profit this year while the company will also benefit from new orders from other vendors.

Samsung will make the main chip in the next iPhone model, regaining a customer previously lost to Taiwan Semiconductor Manufacturing Co., people with direct knowledge of the matter said this month.

The display unit, which includes liquid-crystal displays and screens using organic light-emitting diodes, probably had operating profit of 450 billion won on increased demand for its ultra-thin displays used by lower-end smartphones, according to the analyst survey.

The company’s OLED displays, which offer sharper images at lower power than most LCDs, were mainly used for Samsung’s high-end smartphones, including S6 and S6 Edge with three-sided screens.

Operating profit at the consumer-electronics division, which oversees TVs and appliances, probably dropped to 80 billion won in the quarter, according to the survey.

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