Samsung is expecting record profits for the fourth quarter of 2016, even though it had to deal with the most disastrous recall in its history. The Galaxy Note 7 was discontinued just a couple of months after its launch, as it continued to be a fire hazard for users. But that didn’t hurt Samsung’s bottom line as hard as one would expect. In fact, Samsung is about to post its biggest profit jump in three years, and it’s all thanks to its components business.
Samsung expects fourth quarter operating profits to rise 49.8% from a year earlier to 9.2 trillion won (or $7.76 billion), The Wall Street Journal reports. This would mark Samsung’s biggest operating profit in more than three years. That’s impressive given the company’s main business last quarter was to deal with the massive fallout following the Galaxy Note 7 recall and cancellation.
Samsung may have recalled more than 2.5 million Galaxy Note 7, and Note 7 write-offs may hit at least $5 billion, but Samsung’s chip business is booming.
Samsung is less reliant on its mobile arm than ever, which explains the major profits score for the past quarter. As The Journal notes, Samsung once got three-quarters of its profits from its mobile division. But as mobile sales dropped, the company looked at other money-making avenues.
In the third quarter of 2013, when Samsung last recorded financial results comparable to last quarter, the mobile division brought in 65% of earnings. Now, mobile phone sales accounted for just 1.9% of operating profit. That’s a huge drop for the mobile division. The final results will be released later this month.
But the semiconductor business is doing great, with analysts estimating that chip profits accounted for more than half of profits last quarter.
Samsung is the world’s largest chip maker, the report says, having a 49.1% share of global DRAM sales at the end of September 2016, and 35.5% of NAND flash memory sales during the period.
Samsung provides these components to many companies, including some if its rivals in the mobile business like Apple.
In addition to chips, Samsung is also making smartphone displays for a variety of companies, and its display division is expected to more than double its earnings this year.
That said, analysts still warn that Samsung’s momentum won’t be sustained if smartphones sales do not pick up as well.
As for the Galaxy Note 7, Samsung said at CES 2017 that it’ll soon share the findings of its investigation with the public.