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Samsung second-quarter profit surges to record high on memory chip boom


A visitor tries out Samsung Galaxy S8 smartphones at the electronics giant's shop in Seoul, South Korea (AP)

A visitor tries out Samsung Galaxy S8 smartphones at the electronics giant's shop in Seoul, South Korea (AP)

A visitor tries out Samsung Galaxy S8 smartphones at the electronics giant's shop in Seoul, South Korea (AP)

Samsung Electronics has reported an all-time high quarterly profit, thanks to booming demand for memory chips.

The South Korean company said its April-June net income was 10.8 trillion won (£7.4bn), up 85% from 5.8 trillion won a year earlier.

The result beat expectations. Analysts forecast 10.1 trillion won in net profit according to financial data provider FactSet.

Operating profit jumped 73% over a year earlier to 14.1 trillion won (£9.7 billion) while sales rose 20% to 61 trillion won (£41.8bn), in line with its earlier guidance.

Samsung, the world's largest maker of memory chips and smartphones, probably surpassed Intel's semiconductor revenue during the last quarter and outstripped Apple in quarterly earnings for the first time, if analysts' forecasts turn out to be correct.

Intel is due to report its earnings later on Thursday.

Apple, which is due to report its financial results on Tuesday, is forecast to have booked 8.2 billion dollars (£6.2bn) in net profit during the three-month period, according to FactSet, during a typically slow season for the company.

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Samsung is on track to report its highest-ever annual profit for the year.

But while its bottom line is better than ever, the company's leadership is in turmoil after its vice chairman and de facto chief Lee Jae-yong was jailed amid a corruption scandal that unseated former South Korean president Park Geun-hye.

While Mr Lee and Ms Park battle allegations of bribery and other charges, Samsung is thriving thanks to tiny microchips called DRAM and NAND memory chips, which are needed to store and process data in servers and mobile devices.

Increased uses of connected devices and mobile data have created strong demand for server memory to store, analyse and process data in data centres.

Coupled with tight supply conditions, the surge in demand drove up the prices of memory chips over the past year, allowing the world's two largest memory chip makers, Samsung and SK Hynix, to enjoy an unprecedented level of profitability.

Nearly 60% of Samsung's quarterly income was generated by its semiconductor division, which booked eight trillion won (£5.5bn) in operating income on sales of 17.6 trillion won (£12bn).

Samsung's other component business that produce high-end OLED display panels for smartphones also posted a solid earnings gain as Samsung launched new Galaxy phones in the spring using the advanced displays.

The Galaxy S8 series of smartphones recorded higher sales than their predecessors, helping the company's mobile business to rebound from the fire-prone Galaxy Note crisis that cost nearly £4 billion a year ago.

Samsung said its mobile business booked 4.1 trillion won (£2.8bn) in operating profit.

Looking ahead, Samsung said its third quarter profit may decline as its upcoming launch of the latest iteration of the Galaxy Note series would boost marketing expenses.

But its outlook on the semiconductor business remained rosy.

Samsung said companies would continue to add server memory capacities and increase orders of memory chips for smartphones as they expanded new server platforms, cloud services and launch new smartphone models during the second half of this year.


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