Samsung forecasts a huge jump in profits | Business| Economy and finance news from a German perspective | DW | 07.10.2015
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Samsung forecasts a huge jump in profits

South Korean conglomerate Samsung Electronics has projected its first quarterly profit gain in two years on the back of strong sales in chips and displays. The stellar forecast has sent the firm's shares soaring.

Samsung said on Wednesday that its third quarter operating profit could rise by as much as 80 percent, as sales of chips and displays offset stiff competition in smart phones from Apple and cheaper Chinese rivals.

The company predicted operating profit of around 7.3 trillion won ($6.23 billion, 5.5 billion euros) for July-September quarter, up from 4.1 trillion a year earlier and 6.9 trillion won the previous quarter.

Following the earnings forecast, Samsung's shares surged 8.7 percent on Wednesday.

The projection came despite the firm's flagship smart phone business struggling against fierce competition, sandwiched between top-end rivals like Apple's iPhone and lower-end devices from fast-growing Chinese outfits including Xiaomi.

Growing reliance on chipmaking

But brisk business in chips and displays has largely compensated for these difficulties. And a recent weakening of the South Korean currency, won, also helped boost profits since most sales of semiconductors and display panels to emerging markets are settled in dollars, analysts said.

A weaker won makes South Korean exports more competitive overseas and boosts corporate earnings when repatriated.

As Samsung's reliance on the chipmaking business grew, the firm in May began building a new $14.3 billion chip plant at Pyeongtaek, about 35 miles south of Seoul.

The investment in the factory, which is to begin production in 2017, is the largest the firm has ever committed to a single plant.

sri/uhe (AFP, Reuters)

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