Components Drive Record Earnings -- WSJ

This article is being republished as part of our daily reproduction of articles that also appeared in the U.S. print edition of The Wall Street Journal (July 7, 2017).

SEOUL -- Samsung Electronics Co., riding hot demand for its components, is forecasting its second-quarter operating profit will easily be the company's highest ever, a sign the South Korean technology giant's business is thriving even after a year of political and product stumbles.

Samsung on Friday said it expects second-quarter operating profit of about 14 trillion South Korean won ($12.1 billion), a 72% increase from 8.14 trillion won a year earlier. Samsung estimates revenue will be 60 trillion won from April to June, a sharp rise from the prior year's second quarter of 50.94 trillion won.

Samsung's previous all-time operating-profit record came in the third quarter of 2013 when it posted 10.2 trillion won. Friday's forecast for the second quarter of 2017 was 37% higher. Final earnings results will be released later this month.

Samsung, the world's largest smartphone maker, derives the lion's share of its profit from semiconductors and display panels, a shift from early last year when handheld devices raked in most of the company's earnings.

Samsung has succeeded through consistent aggressive investments around the globe. For years, it has pumped tens of billions of dollars into manufacturing the core components that its technology rivals need to make their own devices, helping Samsung emerge as a front-runner in semiconductors and display panels.

Analysts predict that sales from Samsung's semiconductor business will help Samsung surpass Intel Corp. this year as the world's largest chip maker by that metric.

On Tuesday, Samsung said it would invest an additional 20 trillion won, or more than $17 billion, in its South Korea semiconductor facilities. At one of the sites, in the coastal city of Pyeongtaek, Samsung had already pumped in close to $15 billion.

Samsung also helped pioneer curved displays that are in vogue with smartphone makers because they enable handset designs that look sleeker and less boxy. One sign of its central place in the global smartphone supply chain: Samsung will be an initial supplier of flexible displays for rival Apple Inc.'s iPhone coming out later this year, The Wall Street Journal reported in February.

Samsung's financial performance comes after a rocky year for the South Korean conglomerate. Last year's embarrassing recall of Galaxy Note 7 devices cost the company at least $5 billion and eroded trust with consumers. Samsung refurbished some of those recalled phones using different components and began selling them Friday in South Korea under the name Galaxy Note Fan Edition.

Meanwhile, Samsung's de facto leader, Lee Jae-yong, is standing trial over his alleged role in a bribery scandal that has roiled South Korea. Mr. Lee, who has denied wrongdoing, has been absent from his role as the vice chairman of Samsung Electronics since February. Mr. Lee has been leading the company since 2014 when his father, Samsung Chairman Lee Kun-hee, became incapacitated after a heart attack.

Samsung on Friday didn't provide a breakdown of mobile-phone sales. But the firm's latest flagship device, the Galaxy S8, received positive reviews after its April 21 debut, and some analysts believe robust sales of the handset also helped to fuel earnings.

Galaxy S8 shipments could top 15 million units this quarter, Tim Long, an analyst at BMO Capital Markets, told clients in a note Friday. Samsung has previously said that pre-sale orders in the U.S. and sales in South Korea topped those of the prior year's model, the Galaxy S7.

As with other global technology firms, investors have pushed up Samsung's share price over the past year. Samsung Electronics has jumped 64% over the past year, and Thursday's close at 2,403,000 won falls just short of last week's fresh record high. Shares slipped 0.3% in early trading Friday in Seoul.

Write to Timothy W. Martin at and Eun-Young Jeong at

(END) Dow Jones Newswires

July 07, 2017 02:47 ET (06:47 GMT)