Samsung’s second quarter earnings are set to rise on the back of strong demand for electronic components and the launch of new smartphones.
South Korean electronics giant, Samsung Electronics Co Ltd has disclosed that it expects its results for the second quarter to be as strong as its first as strong demands for its components are likely to offset low-margin pressures on its smartphones.
While its smartphones earnings are feeling the pressure from increased competition, its component business is likely to buttress its second half earnings midst signs of recovery in the prices of display panels and memory chips following a recovery in the sales of gadgets worldwide.
“Looking ahead to the second half of 2016, the company expects its solid performance to continue compared to the first half, mainly driven by earnings increase in the component business,” said Samsung in a statement.
Samsung has reported that its April to June earning have surged by 18% to $7.17 billion (8.1 trillion won). Its results are in line with its profit guidance.
“The company’s performance should remain decent,” said Kim Hyun-su, a fund manager in IBK Asset Management. He expects Samsung to maintain its quarterly profits in the range of 7 trillion won to 8 trillion won for 2016.
Samsung’s mobile division has remained its top earner for a straight second quarter, with its earnings jumping by a whipping 57% from 2015.
Next month, Samsung is likely to launch its next Galaxy Note Smartphone and unveil its phablet a month earlier than its closest rival Apple, which is set to launch its next iPhone in September.
According to Kim, Apple is unlikely to launch any product that will undercut Samsung’s in the second half of the year. Despite this, he feels Samsung will “need to show something different with the new Note phone” in order to maintain its forward momentum.
Hurt by falling chip prices, Samsung’s operating profits for its chip division have fallen by 22% to 2.64 trillion won, its lowest since the third quarter of 2014. It however expects the earning of this division to improve, as companies bring out new gadgets in the coming months.
Incidentally, Samsung supplies chips for Apple’s iPhones.