Samsung shrugs off exploding Galaxy Note 7 debacle as profits rocket

In a remarkable show of resilience, the South Korean tech juggernaut has posted an increase in earnings of 50 per cent for the fourth quarter.

A Samsung Note 7 phone battery catches fire after it exploded during a test. Samsung has managed to rebound from the disaster to post a huge rise in profits for the past quarter. Edgar Su / Reuters

Samsung Electronics has reported a 50 per cent jump in fourth-quarter profits despite the humiliating Galaxy Note 7 recall that hammered the reputation of the world’s largest smartphone maker.

The South Korean tech multinational took another blow when prosecutors began investigating its involvement in a corruption scandal that has seen the country’s president impeached, and sought the arrest of the firm’s de facto leader Lee Jae-Yong.

The group’s flagship subsidiary Samsung Electronics said it posted operating profits of 9.22 trillion won (Dh29.01bn) during the October to December period.

Earnings were “driven by the components businesses, mainly the memory business and the display panel segment”, it said, with the stronger US dollar also boosting profits.

Revenues were largely unchanged at 53.3tn won for the three months, the South Korean tech juggernaut said.

For the full year, the firm said, “Samsung achieved solid results despite the Note 7 discontinuation in the second half” – the only reference to the disaster that saw the company withdraw its much-publicised device.

Operating profits for 2016 reached 29.2tn won, up 10.7 per cent year-on-year, it said, even though revenues were almost flat at 201.9tn won, up 0.6 per cent.

Analysts anticipate the trend will continue into 2017.

“We are expecting Samsung to post record-high profits this year on the back of rising chip prices,” said Greg Roh, an analyst at HMC Investment Securities.

In total 3.1 million Note 7 smartphones were recalled as authorities in the United States and elsewhere banned them from use on planes and even from being placed in checked luggage.

This week Samsung blamed faulty batteries from two different suppliers for the incidents, which the firm previously estimated would cost it $5.3bn.

Samsung has also come up with elaborate step-by-step safety verification procedures for future products to prevent similar disasters, although some analysts remained sceptical.

The findings suggested a lack of attention to product testing and a tendency to rush to market for competitive reasons at the expense of quality control, said Jan Dawson, the chief analyst at Jackdaw Research.

“I have confidence that Samsung will make big process changes going forward, but less confidence that the culture that led to these problems will change in the same way,” he said.

* AFP

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