Can you believe it?
After almost two years of less-than-impressive earnings, Samsung’s fortunes have reversed. The question is whether they’ll stay that way.
For its fiscal third quarter 2015, Samsung—the world’s largest smartphone maker and supplier of components to many of its rivals—reported strong sales of computer chips and displays and an operating profit that dwarfed the same result from a year ago. Samsung’s operating profit for the three months ended Sept. 30 rose 80% to about 7.3 trillion Korean won, or $6.3 billion, and its revenue rose about 7.5% to 51 trillion won. Given the company’s largesse and outsize impact to its home country’s economy, that success translated to South Korea’s won rising to its highest level in almost two months.
It wasn’t that long ago that Samsung was on a tear, riding Google’s Android mobile operating system to smartphone-sector dominance with its Galaxy S handsets. But in recent years the company found itself in a difficult position: outflanked at the bottom of the market by Chinese companies offering low-cost devices and outmatched at the top of the market by Apple and its enormous brand power. Meanwhile, the headlines rolled in: Samsung Galaxy S5 officially a flop, wrote one. Is Samsung’s Galaxy S6 a flop? asked another.
None of the macro trends affecting Samsung and its peers appear to be going away. Global demand for smartphones continues to cool as smartphone makers realize that half of the world already owns one of their products. For Samsung, which is one of the world’s largest chipmakers, that’s OK—so long as its chips remain in the models that do sell.
And that’s what’s happening. Samsung’s chip unit was responsible for half the company’s profit in the third quarter, analysts estimate. Sales of displays to Chinese smartphone makers added a little extra lift.
What’s unclear is whether the company will be able to shore up its Galaxy S6 handset. Just one quarter ago, Samsung failed to meet analyst expectations for its second-quarter earnings in part because of sluggish smartphone sales for its own models. One reason provided by industry watchers? Why, a strong iPhone, of course.
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