Samsung reported that its Q3 operating profit surged 26% to 10.2 trillion won (about $9.6 billion), but continued to warn that its smartphone sales will slow thanks to increased competition. Its earnings growth was driven mainly by Samsung’s chip business profit, which doubled to 2.06 trillion won, the highest in three years, thanks to stronger chip prices this year after a fire last month at one of competitor SK Hynix’s Chinese plants created a shortage in a key component. Demand for chips was driven by mobile devices, servers and the release of new game consoles.
Samsung’s mobile division reported a record 6.7 trillion won, thanks to growing shipment volumes of its inexpensive smartphone models, which balanced slowing sales of high-end handsets like the Galaxy S4 and Note 3. The company warned that demand for its smartphones will slowdown during the upcoming holiday season, due to competition from other devices (such as Apple’s iPhone) as well as tighter margins as it ramps up spending on year end advertising and marketing. Samsung says it expects to see smartphone shipments grow about 1% to 5% in the current quarter from the previous quarter.
Samsung has now reported record profits in six of the past seven quarters, but the South Korean tech giant has also warned investors over the past year to expect a slump in mobile sales thanks to the slowing global smartphone market and increased competition. Its most recent product launches are also unlikely to be major growth drivers. Samsung’s Galaxy Gear smartwatch got a lukewarm response from consumers and its curved smartphone, the Galaxy Round, will have a limited launch in Korea only.