Samsung Q3 profits rise: How Note 7 recall can help its chip business

Electronics giant says operating profit for the July-September quarter was 7.8 trillion won (US$7 billion).

Galaxy Note 7
Samsung to limit Note 7 battery capacity via OTA update and avert battery-explosions

Samsung Electronics shrugged off the impact from the Galaxy Note 7 recall, saying it estimated third-quarter profit rose 5.6 percent, beating analysts' estimates.

South Korean electronics giant said on Friday operating profit for the July-September quarter was 7.8 trillion won (US$7 billion). The rise in profits was boosted by strong growth in chip and display earnings.

A Reuters estimate showed the world's biggest smartphone maker would make a profit of 7.4 trillion won, on par with the previous year's numbers. Samsung has been reeling under the impact of a global smartphone recall following multiple instances of the flagship device catching fire.

Shares in Samsung were up 0.5 percent at 1.7 million won in the afternoon.

However, Samsung did not reveal the cost incurred in recalling close to 2.5 million Galaxy Note 7 devices.

"Obviously the Note 7 recall costs were reflected but (business) segments such as memory and OLED (organic light-emitting diode) displays did well and will probably continue to do so until at least next year," IBK Asset Management fund manager Kim Hyun-su told Reuters.

Interestingly, analysts estimate that Samsung's problems with the Note 7 could indirectly boost its chips busibness, which actually buoyed the company's third quarter results.

Samsung's semiconductor segment is the world's top memory chip maker and this industry is seeing rapid growth as smartphone makers led by Apple Inc. are pushing to take advantage of the Note 7 recall and increase market share.

Again, the recall of about 2.5 million smartphones has meant there is a spike in the demand for the chips, driving up the prices in turn.

Contract prices for DRAM chips, which are used in temporary data usage, are expected to rise up to 10 percent in the October-December period, Reuters reported, citing researcher at TrendForce.