Chips, semiconductors compensate for Samsung Note 7 losses

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Thanks to its components (mainly chips) and semiconductors business, Samsung Electronics has posted an operating profit of 29.2 trillion won ($25 billion) in 2016, despite losses suffered by its mobile division due to the Galaxy Note 7 fiasco.

The logo of Samsung Electronics is seen at its headquarters in Seoul. ( File photo | Reuters)

Samsung posted a fourth-quarter operating profit of 9.2 trillion won ($7 billion), representing a year-on-year increase of 50.11 percent, thanks to gains from its semiconductor branch, Efe news reported on Tuesday.

This figure is also 77.34 percent higher than that of the July-September quarter when Samsung’s operating profit was affected by incidents of Galaxy Note 7 smartphones exploding, and the subsequent recall of the model. The fiasco caused the company an operating loss of 6.1 trillion won ($5 billion).

According to a report in tech website CNET, even as Samsung faced a hit of more than $5 billion, the company posted its best operating profit in three years with the help of its strong demand for components that go inside mobile phones and other electronic devices.

“For 2016, Samsung achieved solid results despite the Note 7 discontinuation in the second half as a result of continuous efforts during past two to three years to strengthen its component business competitiveness by focusing on value-added products and advancing its DRAM and V-NAND memory businesses, as well as its OLED display operations,” Samsung said in a statement.

By comparison, Samsung reported its worst operating profit in two years in the third quarter, the period when it recalled and then stopped the production of Note 7 device.

“Samsung’s mobile division, the division responsible for the Note 7, reported an operating profit of $87.8 million in that quarter — a decline of about 96 percent and its lowest in nearly eight years,” CNET reported.

The South Korean tech giant achieved an annual net profit of 22.73 trillion won in 2016 ($19 billion), an increase of 19.2 percent from 2015.

In the October-December quarter alone, net income was 7.09 trillion won ($6 billion), a year-on-year increase of 120.19 percent, and 56.51 percent higher than the third quarter of 2016.

“Fourth quarter earnings were driven by the components businesses, mainly the memory business and the display panel segment,” Samsung said in a statement.

The company also highlighted the positive impact of a stronger US dollar against the Korean won.

Samsung said its fourth-quarter sales rose 0.3 percent year on year to 53.3 trillion won, and also announced a share repurchase worth about 9 trillion won ($7 billion).

Investors were pleased by the results, with Samsung’s shares trading 0.37 per cent higher one hour after the morning session began on the Korea Stock Exchange.

The data released was a relief for Samsung following the Galaxy Note 7 fiasco and the company’s involvement in the “female Rasputin” corruption scandal that has rocked South Korea.

The latter prompted prosecutors to request the arrest of Samsung Group’s president and Samsung Electronics’ vice president, Lee Jae-Yong.

The court later ruled against the arrest warrant of the Samsung heir, allowing the country’s largest family-run conglomerate to avoid another potential disaster.

Meanwhile, after revealing that faulty batteries in Galaxy Note 7 smartphone caused devices to catch fire, Samsung Electronics on Monday announced new and enhanced quality assurance measures to improve product safety.

The new safety measures include enhanced eight-point battery safety check that would address safety from the component level to the assembly and shipment of devices.

Samsung has also formed a battery advisory group of external advisers to ensure battery safety and innovation.

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