Samsung Electronics achieves a record profit in the third quarter, but warns of a weaker performance

SEOUL (Reuters) – Samsung Electronics Co Ltd (005930.KS) projected a weaker third quarter performance as it posted record third quarter earnings and expectations due to semiconductor data center sales and higher production returns.

FILE PHOTO: The Samsung Electronics logo is on March 23, 2018 in its office building in Seoul, South Korea. REUTERS / Kim Hong-Ji

The South Korean tech giant said it expected quarterly earnings to decline in the fourth quarter as the memory chip market entered a seasonal downturn before recovering in 2019.

The world's largest manufacturer of memory chips and smartphones announced that its operating income increased 21 percent to 17.6 trillion won ($ 15.5 billion) in the July-to-September period. This corresponds to the estimate of the company.

After the Chippreise weakened or sunk after years of star growth, some analysts expect the third or fourth quarter to bring top earnings to Apple Inc. (AAPL.O) Provider and smartphone rival.

Minimal earnings growth is expected in the first half of 2019, followed by a decline in profits, albeit small, in the second half, data from Refinitiv show.

However, efficiency gains and cost reductions in the chip business, which accounts for approximately 78 percent of Samsung's operating income, mean a soft landing.

"As Samsung further lowers the cost of (semiconductors), it is not very likely that there will be a so-called hard landing situation," said Avril Wu, senior research director at DRAMeXchange.

Samsung said the memory chip market will slow down in the first quarter of next year and then stabilize as server demand picks up in the following quarter.

The Semiconductor business saw an increase in operating income of 3.7 percent to 13.7 trillion won, while the Mobile business saw a decline of 1 percent to 2.2 trillion won.

With the weaker storage market, Samsung has seen investments cut 27 percent to $ 31.8 trillion in 2018, compared to a record $ 43 trillion last year when the foundry business was expanded.

Samsung predicted a stabilization of Chippreise in the second quarter of 2019 and agreed with the prospects of South Korean colleague SK Hynix (000660.KS) last week.

Samsung said sales rose 5.5 percent to 65.5 trillion won in the third quarter, slightly ahead of expectations.

Coverage by Heekyong Yang and Ju-min Park; Editing by Stephen Coates

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