The Samsung logo on its office building in Seoul, South Korea. Picture: REUTERS
The Samsung logo on its office building in Seoul, South Korea. Picture: REUTERS

Seoul — Samsung Electronics has announced an executive shakeup, the same day as it posted a record quarterly profit.

The South Korean tech giant logged profit of 11.2-trillion won ($10bn) in the July-September period, it said on Tuesday, its best for any quarter.

The world’s biggest memory chip and smartphone maker has had its de facto leader jailed for bribery and faced a recall of its flagship Galaxy Note 7 device.

But its net profits soared 148% on the same period a year ago, it said in a statement, thanks to strong demand for its memory chips and a recovery in smartphone sales with the roll-out of the new generation Galaxy Note 8.

The figures come only two weeks after CEO Kwon Oh-Hyun resigned, saying the South’s biggest firm was facing an "unprecedented crisis" and its current profitability was "merely a fruit of decisions and investment made in the past".

The firm described Tuesday’s numbers as an "overall robust performance".

Operating profit nearly tripled year on year to 14.5-trillion won — also a quarterly record — it said in a regulatory filing, while sales surged to 62.05-trillion won, another record high.

Samsung Electronics is the key subsidiary of the sprawling Samsung Group, whose heir Lee Jae-Yong was found guilty in August of bribery, perjury and other charges stemming from payments to the secret confidante of ousted president Park Geun-Hye.

Lee, who was jailed for five years, says he is innocent and is appealing.

The company named new heads of three businesses on Tuesday, with co-CEOs JK Shin and Yoon Boo-keun to step down.

Kim Ki-nam, president of the semiconductor business, was named new head of the components business; Koh Dong-jin as new head of information technology (IT) and mobile communications, and Kim Hyun-suk as new head of consumer electronics.

Current chief financial officer Lee Sang-hoon would resign from his role and had been recommended as chairman of the board, Samsung said in a statement.

The 2017 Galaxy Note 7 recall — due to exploding batteries — dealt the firm a crippling blow to its mobile business.

But its profits and share price have rocketed this year, as global chip prices have soared with suppliers such as Samsung yet to catch up booming demand for high-powered processors used in handsets, computers and cloud storage servers.

The firm provides memory chips for PCs, servers and mobile gadgets of its own but also industry rivals including Apple, with that "component business" helping the firm cushion a fall in sales of its own devices.

It also said on Tuesday that it would double its dividends in 2018, and confirmed a further share buyback for the fourth quarter.

Despite the turmoil at the group, Samsung has sustained and widened its lead in the market, partly by investing massively in building and expanding semiconductor factories, often faster than its rivals.

Its investment in infrastructure, mostly on chip plants, would reach a whopping 46.2-trillion won just for this year, compared with 25.5-trillion won in 2016, it said.

The firm operates the world’s biggest semiconductor plant in the city of Pyeongtaek, 70km south of Seoul, and is upgrading or expanding many of its production lines there and elsewhere.

Such aggressive investment has stoked concern that its increased supplies may drive down prices and eventually dent the firm’s own profits in subsequent quarters.

But senior vice-president Chun Se-Won told a conference call, "We are looking at a longer-term horizon … with a goal of boosting our business capabilities for the next two or three years and beyond."

Samsung shares rose 1.5% to 2.74-million won in midday trading on the Seoul stock market on Tuesday.

Kim Yang-Jae, analyst at KTB Investment & Securities, said profits would rise further in the fourth quarter, with global semiconductor prices continuing to rise into next year.

"Samsung’s display unit would also see profits grow as it supplies panels to Apple’s iPhone X," Kim said, forecasting a new record operating profit of 15-trillion won in the fourth quarter.

Samsung predicted "positive growth" in the semiconductor business next year as technological advances in artificial intelligence (AI) and machine learning fanned demand for high-powered processor chips.

Reuters and AFP

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