Samsung posts biggest profit in over 2 years on smartphone sales

Samsung Electronics, South Korean tech behemoth, posted the biggest operating profit in more than two years on the back of strong sales of its flagship Galaxy series, the company said Thursday.

Operating profit was 8.14 trillion won (7.22 billion U.S. dollars) in the April-June period, up 18 percent from a year earlier. It surpassed market expectations of 7.4 trillion won on average, marking the largest in nine quarters since the first quarter of 2014.

Revenue increased 5 percent over the year to 50.94 trillion won in the second quarter, and net income rose 1.7 percent to 5.85 trillion won.

Samsung's smartphone business generated 4.32 trillion won in operating profit, accounting for more than half of the company's total profit thanks to demand for Galaxy S7 smartphone series. Its smartphone revenue amounted to 26.56 trillion won.

It marked the first time in two years that Samsung's smartphone profit topped 4 trillion won. The smartphone unit's operating profit tumbled to 1.75 trillion won in the third quarter of 2014 after peaking at 6.7 trillion won in the second quarter of 2013.

Samsung sold 16 million units of Galaxy S7 series in the April-June period, while demand for lower-priced models such as Galaxy A and J series contributed to the smartphone division's outperformance.

Mobile phone sales, including smartphones, totaled 90 million units in the second quarter, with tablet sales reaching 6 million. The portion of smartphones in total mobile phone sales took up more than 80 percent.

The semiconductor unit recorded 2.64 trillion won in operating profit. It was a slight rise from a 2.63 trillion-won profit in the previous quarter despite falling chip prices that were offset by robust demand for Samsung-made 3D NAND flash memory chips and 14-nanometer mobile application processors.

Consumer electronics business logged an operating profit of 1.03 trillion in the April-June period, almost doubling 510 billion won in the previous three-month period. It was attributable to demand for second-generation quantum dot TVs and self-collection refrigerators as well as washing machines and air-conditioners.

The display panel division posted a 140 billion-won operating profit in the second quarter, turning around from a 270 billion-won operating loss in the previous quarter. Its revenue recorded 6.42 trillion won.

Positive second-quarter earnings came despite negative impact from the moves of the won/dollar exchange rate. Samsung said the South Korean currency's appreciation versus the U.S. dollar and the European single currency reduced profit by about 300 billion won.

Samsung predicted a positive earnings result in the third quarter, with market consensus for the third-quarter operating profit set at 7.8 trillion won. Demand for chips and display panels are expected to be strong due to the launches of new smartphone models from Samsung and Apple.

Profit from the smartphone business is expected to fall amid the projected fierce competition following the rollout of iPhone 7 scheduled for September. Samsung plans to new Galaxy Note model in early August, but expectations for new model sales are currently low.

For the first six months of this year, Samsung's operating profit increased 15 percent from a year earlier to 14.82 trillion won. Revenue gained 5.3 percent to 100.72 trillion won, and net income climbed 7 percent to 11.1 trillion won.

Facility investment amounted to 8.8 trillion won in the first half. During the second quarter, spending on facilities reached 4.2 trillion won, with 2 trillion won being spent on chip equipments and 1.6 trillion won on display panel facilities. Endit