Samsung Group's three electronic subsidiaries - Samsung Electronics Co., Samsung Electro-Mechanics Co. and Samsung SDI – are expected to show the best-ever performance in the third quarter this year.
This is because semiconductors lead the overall performance while existing core businesses, such as smartphones, televisions and home appliances, are now bouncing back as well as new business of automotive components, including batteries, continues to show growth. However, the group needs to seek out a new growth engine considering the fact that smartphones and home appliances have reached the growth limit and semiconductors cannot continuously have a high growth trend.
According to industry sources on Sept. 17, Samsung Electronics’ operating profit in the third quarter is forecast to hit a quarterly record at 17 trillion won (US$15.09 billion). The operating profit Samsung Electro-Mechanics is also expected to reach a record high at 300 billion won (US$266.31 million), while that of Samsung SDI is forecast to reach 200 billion won (US$177.62 million), the highest figure after reorganizing its business system based on batteries and electronic materials in 2016.
According to financial market tracker WISEfn, these figures are also similar with the average operating profit projections of securities firms. Samsung Electronics’ operating profit projections in the third quarter stand at 17.3 trillion won (US$15.36 billion), up 10.6 percent from 15.64 trillion won (US$13.89 billion) of the record high previously set in the first quarter.
Samsung Electronics is forecast to see its display division, which showed poor performance in the previous quarter with 140 billion won (US$124.33 million) of operating profits, show growth of 700 billion won (US$621.67 million) thanks to a greater demand of smartphone organic light emitting diode (OLED) panels and its smartphone division performance bounce back with the release of the Galaxy Note 9. Its television division is also expected to improve profitability in the third quarter compared to the previous quarter.
Samsung Electro-Mechanics is forecast to post 287.2 billion won (US$255.06 million) in operating profit, showing a whopping 29.1 percent growth from 222.4 billion won (US$197.51 million) of the previous record in the second quarter 2013. This is largely due to the fact that multi-layer ceramic capacitor (MLCC) is continuously in short supply as the demand has expanded not only information technology (IT) device but also other various device areas, including vehicles.
Samsung SDI posted as much as 900 billion won (US$799.29 million) in annual operating profit in 2003 when the company focused on the plasma display panel (PDP) business in the past. However, it is impossible to make a direct comparison due to a different business structure now. The latest improvement in its performance results from the boom in the battery business owing to the rapid increase in small cylindrical batteries and the securement of sustainable profitability in the electronic material business, including OLED.
However, Samsung SDI succeeded in turning its annual operating loss to profit last year and posting 224.8 billion won (US$199.64 million) in operating profit in the first half of this year alone. The figure nearly doubled from 116.9 billion won (US$103.82 million) of an annual operating profit last year. Its operating profit is forecast to surpass more than 600 billion won (US$532.86 million) at the end of this year.
However, the industry believes that the three electronics subsidiaries don’t have so rosy future as the bellwether Samsung Electronics needs to seek for a new growth engine after memory chips, though the subsidiaries recently showed improvement in performance. An official from the industry said, “It is certain that semiconductor chips will lead the group’s performance until this year but the Samsung’s electronics businesses need to find a new growth engine in the automotive electronics business after next year.”