Samsung reports chip exports boom

But smartphones forecast lags, facing ‘competition from every direction’

Samsung Electronics Co. beat analysts’ profit estimates on booming exports of memory chips, but warned of challenges in smartphone demand in the coming months.

Net income rose to 11.6 trillion won ($13.8 billion) in the three months ended March, the Suwon, South Korea-based company said in a filing Thursday, exceeding the 10.9-trillion-won average of projections compiled by Bloomberg.

Sales climbed 20 per cent to 60.6 trillion won.

Although the results demonstrate the chips business is strong, Samsung offered no such reassurance for the smartphone industry, where suppliers have issued gloomy outlooks. The company said its own mobile division will see declining profitability amid weak demand and warned of softer demand for the screens used in Apple Inc.’s iPhone X smartphone.

“Semiconductors are doing better and it sets the stage for a very strong second quarter,” said Sanjeev Rana, a Korea technology analyst at CLSA.

Samsung stock has fluctuated this year on concerns of slowing chip and smartphone markets after they traded near record highs in 2017.

The mobile-phone industry hit a slowdown as markets from the U.S. to China grow more saturated. Global smartphone shipments fell 8.5 per cent in the fourth quarter and declined 0.5 per cent for the year, according to researcher IDC.

Samsung’s chips unit posted operating profit of 11.6 trillion won, three times as much as the higher-profile mobile division.

But Samsung warned that its mobile business will see “stagnant sales of flagship models amid weak demand and an increase in marketing expenses” in the current quarter.

“Samsung is facing competition from every direction,” said Jusy Hong, analyst for mobile devices at IHS Markit.