Samsung Electronics Co Ltd. sees likely 10.1 trillion won ($9.4 billion) in Q3 operating profit during the third quarter of 2013, an increase of 24% in a year and 5% higher than the previous quarter.
Sales of memory chips have risen steeply. However, the smartphone market has slowed down.
While Samsung experienced a slow down in its smartphone market, especially in its flagship Galaxy S4, the semiconductor business has picked up significantly, the company announced.
Experts say that the recovery in Samsung’s semiconductor earnings more than offset poorer mobile telecommunication device sales.
A fire at an SK Hynix plant in China last month contributed to a semiconductor shortage. SK Hynix, a Chinese company, is the second largest memory chip maker globally.
The Wall Street Journal believes that Samsung, the world’s biggest memory chip maker, may face pressure from shareholders to let some of its cash pile go, because the smartphone market is “saturated” and is likely to affect earnings growth.
Samsung will face pressure to explain how it can prevent profits from falling sharply in the near future now that earnings of its handsets have peaked. The company reported record profits every quarter last year, but not in Q1 2013.
According to Barclays Capital, S4 smartphone sales will have fallen to 16 million units in Q3, compared to 20 million during the two months following its launch in April this year. Barclays adds that during Q4 sales may slide further to about 13 million units.
In an interview with the BBC, Andrew Milroy, an analyst with consulting firm Frost & Sullivan said “The company is doing a phenomenal job of continuing its growth rate. One would have expected that its growth rate may be hit by the emergence of other cheaper mobile phone makers. But it doesn’t seemed to have happened, at least not yet.”
Samsung profit historically tied to smartphone market
Samsung’s range of smartphones have been pivotal in helping the company becoming a leading player in the market for mobile handsets.
Rather than aim at just one section of the market, it has catered for upmarket customers to challenge Apple’s iPhone dominance, as well as low-end consumers in the emerging markets.
Video – Samsung smartphone with curved display
In September, Samsung’s head of strategic marketing, D.J Lee, said the company was going to launch a new smartphone with a curved display in October 2013.