Samsung logs record-high profit on memory chips
SEOUL, KOREA — Samsung Electronics reported another record high in quarterly earnings Tuesday, thanks to the unprecedented boom in the memory chip industry and predicted that another record-breaking quarter is on the horizon, a breathtaking run for a company fighting to get its leader out of jail.
The company also announced a new leadership lineup and a huge capital investment plan. Instead of a big overhaul, the company showed its preference for stability by naming three insiders to replace three departing chief executives.
Surging mobile data traffic and the rise of cloud computing helped Samsung, the world’s largest maker of smartphones, hold onto its record-breaking earnings streak even as its de facto chief and vice-chair, Lee Jae-yong, was sentenced to five years in prison after being convicted of bribery.
Hearings are underway at an appeals court as Lee, a grandson of Samsung’s founder, contests the conviction for offering bribes to then-President Park Geun-hye and a close friend, allegedly to ensure a smooth transition of corporate leadership at Samsung.
For now, Samsung is reaping the fruits of massive investments during the past decade during the days of Lee’s father when the highly cyclical memory chip industry was vulnerable to swings in global demand for consumer electronics products.
The South Korean company’s July-September net income surged 150 per cent to 11 trillion won ($9.8 billion), compared with 4.4 trillion won a year earlier. Sales rose 30 per cent to 62 trillion won ($55.1 billion) while operating profit nearly tripled from the previous year to 14.5 trillion won ($12.9 billion), in line with its preview.
As global tech giants such as Amazon, Google, Microsoft, Facebook and Apple expand their data centres and invest in connected cars, artificial intelligence and cloud computing, Samsung’s semiconductor division appears nearly invincible. It generated 10 trillion won ($8.9 billion) in operating income during the three-month period, accounting for about 70 per cent of its entire operating income. The prices of DRAM and NAND memory chips soared as demand outpaced tight supplies.
There is some concern that Samsung’s long-term strategic planning may suffer due to Lee’s imprisonment. But the three new leaders will continue to oversee its phone, components and appliance businesses, avoiding a leadership vacuum for the conglomerate’s daily operations.
Kim Kinam will lead Samsung’s semiconductor and display businesses while Kim Hyunsuk will be the head of its consumer electronics division and Koh Dongjin, the head of the mobile business, the company said in a statement.
The trio already were running Samsung’s key teams and are well-known in the industry.
To respond to the surge in demand for memory chips, Samsung plans 46.2 trillion won ($41.1 billion) in capital expenditures this year.