Samsung 4Q17 Profits Surge On Robust Chip Demand
Robust memory chip demand boosted Samsung Electronics' profitability in the fourth quarter of 2017, when the vendor's net profits surged 72.9% on year to KRW12.26 trillion (US$11.5 billion).
Samsung reported operating profits of KRW15.15 trillion on consolidated revenues of KRW65.98 trillion for the fourth quarter of 2017. Operating profits were 64.3% above the levels one year ago, while revenues represented a 23.7% increase.
Samsung indicated fourth-quarter earnings were driven by its components operations particularly the DRAM and NAND memory business. Memory chip orders for servers and mobile storage were strong.
Samsung's semiconductor division posted KRW10.90 trillion in operating profits on consolidated revenues of KRW21.11 trillion for the fourth quarter. The company noted its memory business achieved strong earnings amid favorable market conditions. For its system LSI business, earnings slowed as sales of mobile processors and image sensors decreased under weak seasonality.
Earnings for Samsung's foundry business also declined on seasonal factors in the fourth quarter. However, the ramp-up of its second-generation 10nm process products for flagship smartphones and growing demand for cryptocurrency mining chips will drive the unit's earnings growth in the first quarter of 2018.
Samsung's display panel business, which manufactures OLED and LCD screens, enjoyed rising shipments of OLED panels for premium smartphones in the fourth quarter, the company disclosed. In contrast, profitability for LCD panels decreased due to weak seasonality, which dampened sales and ASP.
Samsung's display panel operations generated KRW11.18 trillion in consolidated revenues and KRW1.41 trillion in operating profits in the fourth quarter. Despite falling sales of its LCD panels, total earnings for the business grew sequentially driven by increased shipments of OLED panels for flagship smartphones.
Meanwhile, Samsung's IT & mobile communications division posted operating profits of KRW2.42 trillion on consolidated revenues of KRW25.47 trillion in the fourth quarter. The company saw its total smartphone shipments fall compared to the prior quarter. A hike in marketing costs also eroded the earnings generated by its mobile segment during the fourth quarter.
Samsung's CE division comprising the TV and home appliances businesses posted profit gains in the fourth quarter. Earnings generated from its TV segment registered sequential growth thanks to increased sales of premium products including ultra large-size and QLED models.
Looking into the first quarter of 2018, Samsung expects strong memory demand for data centers, a pick-up in system LSI product shipments and improvement in AP and image sensor orders for flagship smartphones to make a positive contribution to its performance during the quarter despite the period being a traditionally weak season.
Samsung also expects its mobile business to see earnings improvement in the first quarter of 2018, thanks to the availability of its upcoming Galaxy S9 model.
Samsung's revenues and operating profits for all of 2017 came to KRW239.5 trillion and KRW53.65 trillion, respectively, up 18.6% and 83.4% from a year earlier.
In addition, Samsung disclosed its capex for 2017 reached KRW43.4 trillion. Capex plans for 2018 have not been finalized, but the company expects the total amount to decrease on an annual basis.
In other news, Samsung's board of directors has approved a 50:1 stock split as a step to enhance shareholder value. The board believes the stock split will make investing in Samsung more accessible and provide dividends to a wider range of investors from 2018.