Samsung Electronics forecasts record profits for the final three months of 2017. However, the profit estimates are relatively lower compared to analyst expectations. Operating profit forecasted by the company is expected to hit 15.1 trillion Korean won or about $14.13 billion. This will represent a massive 64% rise compared to the same time last year. Analysts were projecting the Korean tech giant to record at least 15.9 trillion won in operating profits.
This huge success comes in the backdrop of many challenges. Last year, top Samsung officials were engulfed in corruption scandals. The heir of the entire Samsung Group was imprisoned in August for corruption charges. The company has also had to deal with management upheaval after CEO Kwon Oh-hyun resigned. Former CEO cited an “unprecedented crisis” as his reason for stepping aside.
Analysts feel that the company could slowly be plunging into a leadership crisis and recent signs are definitely worrisome. In addition to this, a stronger won (the South Korean Currency) has also had an effect on the profit estimates and this could be replicated next year. Nonetheless, the forecast is quite robust.
Samsung says that the growth was largely driven by the memory chips. The forecast also keeps the Korean company on track to report record yearly profits. 2017 has been a great year for computer memory chips. Prices have surged steadily and even though many analysts are hoping that this trend will continue, the outlook for 2018 is still uncertain. Investors are already betting against the chip boom in 2018. In November, Samsung shares dropped 10% from their all-time high as a result of this issue.
Samsung is also expected to face a lot of competition in the smartphone market. Although traditional competitors like Apple have been here for a while, the entry of Chinese smartphone makers that are able to offer relatively cheaper products could upset the balance for Samsung.
The Korean company has shown some commendable resilience in 2017. However, it wasn’t the best year by any means. The fact that the smartphone maker was able to report record profits for the final quarter of 2017 and remains on track to report record profits for the year is a great sign. But there are a few challenges that the company will need to overcome in 2018.
The jailing of its heir, Lee Jae-yong, for bribery has had a destabilizing effect, especially at top level leadership. In addition to this, in 2016, Samsung announced a global recall of its flagship Note 7 due to overheating and exploding batteries. This was a big dent in Samsung’s reputation and it will take some time before the company can move past it.
The memory chip boom seems to have offset the losses that could have arisen from the Note 7 fiasco. But nobody knows how long Samsung Electronics will be able to continue dominate the chip market. However, so far, the growth trajectory is looking good. Samsung Electronics is one of the key companies within the Samsung conglomerate, one the largest family-run businesses in South Korea.
