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In a regulatory filing on Friday, the South Korean technology giant said its third-quarter net profit gained 1 percent to 2.19 trillion won (US$2.39 billion) from a year ago when it earned 2.17 trillion won, beating a market consensus of falling to 2.12 trillion won. Compared to the previous quarter, its net profit was up 54 percent.
Sales jumped 9.6 percent year-on-year to a record 16.7 trillion won from 15.2 trillion won a year earlier. On a quarter-on-quarter basis, sales soared 14 percent. Operating profit also surged 11.7 percent year-on-year to 2.06 trillion won, higher than a market consensus of 1.7 trillion won. The profit was a 127 percent rise from the second quarter.
The company attributed the better-than-expected results to brisk demands for its memory chips, handsets and flat screens.
"Record quarterly sales in the telecommunication handset business, coupled with a strong performance by the semiconductor business despite challenging market conditions, fueled the company's overall performance," it said in a statement.
Despite falling memory chip prices amid an industry-wide oversupply, Samsung sold 5.1 trillion won worth of semiconductor products in the third quarter, up 18 percent from three months earlier on the back of its "successful cost-cutting efforts and increased sales of high-end and more profitable products."
The profit margin for its NAND flash memory chips -- used in digital consumer products like cameras and music players -- is rising sharply, while margin for DRAM, or dynamic random access memory chips used in personal computers, is slowly increasing, company officials said.
Samsung's mobile phone business has served as the main engine for the company to offset the sluggish chip business. It sold a record 42.6 million handsets during the July-September period, compared with 37.4 million in the second thanks to strong demand of its premium-level handsets in emerging markets, company officials said.
Samsung exceeded Motorola in handset sales and the number of cell phones sold to become the world's No. 2 mobile phone manufacturer during the second quarter behind Finland's Nokia Corp.
Samsung's flat screen business also boosted the company's profit. Its sales of liquid crystal display (LCD) panels amounted to 4.02 trillion won, up from the previous quarter's 3.34 trillion won and higher than the 3.18 trillion won recorded a year earlier.
Chu Woo-sik, Samsung's senior vice president for investor relations, said the third-quarter earnings results are "enough to dismiss lingering concerns over Samsung Electronics' market competitiveness," referring to the poor performance in the previous quarter.
In the second quarter, the technology giant's net profit plunged 5 percent from a year earlier to 1.42 trillion won, marking the lowest in four years, hit by a steep fall in computer memory chip prices. The second-quarter results raised doubts about Samsung's future profit with forecasts that memory chip prices would remain weak.
Still worse, the chip maker was hit by an extensive power outage in August, which forced it to shut down six chip production lines at its main Giheung complex, south of Seoul. The company estimated overall losses from the outage at around 40 billion won.
Samsung Group Chairman Lee Kun-Hee has warned of a slump in its main technology business. Lee said that "we are sandwiched" between high-tech Japan and low-cost China. "China is catching up fast. Japan is racing ahead but we are running in one place," he said, calling for the company to make desperate efforts.
Chu expressed confidence that Samsung will maintain its momentum in the fourth quarter with an expected increase in demand, but analysts remain cautious, citing the sluggish semiconductor business that accounted for more than percent of Samsung's operating income.
"Market conditions for memory chips are more serious than expected," said Song Jong-ho, an economist at Daewoo Securities.
Samsung's average selling price for its benchmark DRAM chip fell 55 percent in the third quarter from a year earlier, according to industry analysts. Prices of NAND flash memory chips are also unlikely until later next year.
