Samsung's Q2 2018 earnings made it seem that its record profits run was ending. It may not be over yet as improved performance by its chip unit may result in record profits for Q3 2018 as well. Increased demand from data centers and better production yields may drive record third-quarter profits for the company.
The semiconductor division is unquestionably Samsung's cash cow. It has driven the company to post record earnings over the past couple of years. There were concerns about a slowdown in the market which would have negatively impacted the company's bottom line.
DRAM price increase will lead to improved profitability
It's now said that Q3 2018 will mark a peak in earnings because the two-year super cycle of high demand and low supply comes to an end. It worked in Samsung's favor and made it the top semiconductor company in the world. However, with the demand and supply gap reducing, prices of some kinds of chips have already slid sharply.
A Refinitiv poll of 15 analysts suggests that Samsung Electronics may post an 18 percent surge in profits to 17.2 trillion won or $15.5 billion. Its revenues are expected to be up by 3.7 percent. It would significantly outpace the 6 percent operating profit growth in the previous quarter where sluggish Galaxy S9 sales and increased competition for the mobile business ate into margins.
The increase in the prices of DRAM chips will help Samsung achieve this. They have surged 14 percent in Q3 compared to the same period last year. This has provided a hedge against falling NAND prices as supplies for these chips has outstripped demand. Analysts now expect DRAM prices to fall in the fourth quarter which would certainly reflect in Samsung's bottom line. The company is yet to release its earnings guidance for the third quarter of this year.
