Samsung semiconductor sales smashes second quarter

The Samsung consumer business might have gone down in a ball of flames last year, but 2017 is proving to be a different type of game as the semiconductor business unit reports impressive growth.

Revenues across the second quarter rose an impressive 19% year-on-year to KRW 61 trillion, with operating profits jumping a whopping 72% to just over KRW 14 trillion. The growth here has been led by semiconductor business, which has been eating up market share over the last couple of quarters, with increased 46% to KRW 17.5 trillion.

Looking more specifically at the trouble child of the Samsung family, it would appear the memories of consumers are relatively short-lived, as the pyromaniac tendencies of the mobile division have been forgotten. The IT & Mobile Communications unit, continued to recover from the flaming disaster of the Galaxy Note7 with 13% growth across the quarter. The IT & Mobile division accounted for roughly 49% of total revenues for the quarter at just over KRW 30 trillion.

While this would be deemed a successful quarter for a business which almost faced disaster, the future certainly looks brighter for the mobile team. Operating profit for the quarter remained relatively steady year-on-year at just over KRW 4 trillion, however it doubled quarter-on-quarter. Quarter-on-quarter, the number of premium smartphones increased significantly, though total sales remained steady as sales of mid- to low-end products decreased.

The team has not specifically detailed whether this is an intentional business strategy, though it does sound remarkably similar to the Apple model. Apple has concentrated on the premium market, focusing more on profitability than overall sales (though it does sell an extraordinarily high number of units), and therefore collects the lions’ share of profits which is supposed to be divvied out another the handset manufacturers.

Samsung has stated that it would continue its mid- and low-end models for the emerging markets, though if it is able to maintain total number of sales, but shift a higher proportion onto the premium models in the established markets, it wouldn’t be a bad move. Apple has proved the model can work, and while Samsung does not have the cult-like following of iLifers, it has demonstrated to have a resilient (and fireproof) set of admirers. It’s a good sign.

Looking at the semiconductor business, the increase in revenue is certainly impressive, however operating profits at KRW 8.03 trillion deserves another round of applause. This is 57% of the total profits for the quarter.

The memory business saw high-demand for high-density server DRAM and SDD, though mobile saw the predictable seasonal demand weaken. Another area which has worked out well for the team is the limited supply conditions pushing up unit prices. Now we are of course not cynical, but fancy that working out well for Samsung.

On the NAND side of things, the team has stated earnings were driven by expanded sales of value-added products, such as mobile products over 64GB, datacentre NVMe SSD and enterprise SSD. This is an area which the team predicts will continue to be a strong performer over the second half of the year, with various flagship smartphone launches and expansion of new datacentres. It also predicts the restricted supply conditions will remain, which is bound to help profitability over the second half. Fancy that.

Overall, it has proved to be a very successful quarter for the business. Who would have thought that after a few months of disaster and dismay in 2016.