Samsung expects Q3 profits to rise despite Note 7 recall, helped by chip & display sales

Samsung Library at Sungkyunkwan University

Samsung may be looking at a billion-dollar hit for the cost of recalling and replacing almost 2.5M faulty Note 7 devices, but it still expects to report increased year-on-year profits in Q3, up 5.5% on last year. The company has today issued earnings guidance of profits of around 7.8 trillion Korean won ($7B). It does, though, expect sales to fall around 5% to approximately 49 trillion won ($44B).

The company hasn’t yet provided any information on the financial impact of the Note 7 recall, but analysts cited by the WSJ say that component sales to other manufacturers are likely responsible for the boost in profits …

Samsung was likely able to find solace in strong performances at its semiconductor and display divisions, analysts say […] 

The company has been a strong player in DRAM memory chips and next-generation flash memory chips—called 3-D NAND—as well as in organic light-emitting diode, or OLED, panels.

“It’s hard to ignore the recall costs, but the semiconductor and display markets are solid,” said Lee Seung-woo, an analyst at IBK Securities in Seoul.

The company reported its most profitable quarter in two years when it shared its Q2 financials back in July. The company said at the time that it believed that Note 7 sales would allow it to maintain momentum into Q3, not knowing then what lay ahead.

Samsung has had a rough ride over the past couple of years, finding its flagship smartphones competing not just with Apple but also with Chinese brands like Huawei and Oppo moving into the premium end of the market.