Chip Sales Buttress Samsung's Earnings

Semiconductor sales buttressed earnings at Samsung Electronics again in the second quarter. The semiconductor division has cemented its position as Samsung's top cash cow after achieving the best performance among all divisions since the third quarter of last year.

Samsung said Thursday that second-quarter revenues totaled W48.5 trillion and operating profit W6.9 trillion (US$1=W1,170). The earnings were little changed from preliminary figures Samsung announced on July 7.

Samsung has managed to boost earnings for three consecutive quarters. Semiconductors led growth, contrary to earlier guesses that smartphone sales would have been chiefly responsible for a robust performance on the back of the release of the Galaxy S6.

The semiconductor division achieved an operating profit of W3.4 trillion during the second quarter, the first time since the third quarter of 2010 that it surpassed W3 trillion. It was also the second-highest quarterly operating profit for the division.

A Samsung spokesman said, "Rising demand for high-capacity and high value-added semiconductors for use in smartphones and servers was the main reason" for bumper earnings.

Smartphones now use high-capacity 64 to 128 GB NAND flash chips. A photograph taken with the Galaxy S6 is a 5MB file, showing how intricate mobile phone cameras have become, while handsets also require ever-larger memory space to store movies.

Samsung expects robust semiconductor sales to continue as new smartphones are unveiled and servers and PCs increasingly use solid state drives with NAND flash chips.

Samsung's IT mobile division did not see Galaxy S6 sales go through the roof, but a steady recovery is evident. Second quarter operating profit came in at W2.76 trillion, up W20 billion from the first quarter.

"There was higher-than-expected demand for the new Galaxy S6 Edge, but we had problems meeting it," a spokesman admitted.

Consumers preferred the Galaxy S6 Edge with a curved-edge monitor instead of the flat-screened S6, but an error in forecasting demand and production capacity prevented Samsung from delivering enough products on time.

Marketing costs also rose with the launch of the Galaxy S6.

The home appliances business, which posted losses in the first quarter, managed to achieve a W210 billion operating profit.