Samsung cuts capital spending

Bloomberg

Samsung Electronics Co. posted quarterly profit that topped analyst estimates on growth in its memory chip business, but signaled caution in semiconductors by announcing a cut in capital spending for the year.
Net income rose to 13 trillion won ($11.4 billion) in the three months ended September, the Suwon, South Korea-based company said in a filing on Wednesday. That compares with the 12.9 trillion won average of estimates compiled by Bloomberg. Capital spending this year will drop 27 percent to 31.8 trillion won.
Samsung said it’s seeing “weak seasonality” for the chip market in the fourth quarter, and warned that earnings would decline in the period.
Operating profit was 17.6 trillion won on sales of 65.5 trillion won, the company said, in line with preliminary numbers released this month.
Samsung, SK Hynix Inc. and Micron Technology together control more than 90% of market for dynamic random access memory, chips, used in everything from data servers to smartphones. Operating
income from chip unit amounted to 13.7 trillion won, accounting for the lion’s share of profit.
Samsung’s smartphone division posted 2.2 trillion won in operating income, down from 3.3 trillion won a year earlier.
Samsung’s operating profit from its display business was 1.1 trillion won, up from 970 billion won a year earlier. The display division benefited from “increased demand for flexible displays from major customers,” Samsung said in a statement, adding that it expects “solid demand to continue in the OLED business.” Samsung supplies OLED screens to Apple Inc. for its iPhones even as the two companies vie for dominance in the premium phone market.
Samsung’s consumer electronics unit had operating profit of 560 billion won.

“Chips and displays led the earnings,” said Greg Roh, a Seoul-based analyst at Hyundai Motor Securities. “Displays did better than expected and we think that’s because Samsung shipped more than 30 million units of large 6.5-inch screens for iPhones.”
Samsung’s consumer electronics unit, which includes TVs and appliances, had operating profit of 560 billion won.
Samsung is one of South Korea’s biggest exporters and said earlier this year that one of its biggest obstacles for business would be global protectionism, warning its employees to brace for potential implications. The company is expanding its ability to produce memory chips and smartphones, spending tens of billions of dollars in semiconductor plants and building the world’s largest smartphone factory in India.
“The share price should rebound on confidence that demand for memory chips is going to go back up in the bottom half of next year,” said Song Myung-sup, an analyst at HI Investment & Securities Co in Seoul. “We’re searching for clues on it.”