The world’s largest chipmaker Samsung Electronics Co. would up its facility investment this year “significantly” from last year’s record spending of 25.5 trillion won, having already spent 22.5 trillion won ($20 billion) in the first half.

“Although the capex plan for 2017 has not been finalized, the annual capex is expected to be significantly higher than the previous year,” the company said Thursday in a statement confirming record-high income statement for the second quarter.

At 12:53 p.m. on Thursday, shares of Samsung Electronics stood at 2,497,000 won up 5,000 won or 0.2 percent from the previous session.

During the April-June period alone, the top smartphone and component maker spent 12.7 trillion won - 7.5 trillion won in semiconductor business and 4.5 trillion won in the display segment - to “reinforce its technological leadership in the semiconductor and OLED industries” and to “transform the System LSI and Foundry business as future growth engines.”

“Despite the increase in 2017 capex for the memory business, the memory supply outlook for Samsung for this year remains unchanged,” which would help to maintain “favorable” conditions for the world’s largest memory vendor in the second half.

Supply will remain tight due to ever-growing demand for high-density memory and SDD to power datacenters and burgeoning smart applications.

The overall earnings, however, may slightly weaken for the company in the coming quarters due to softening in the display panel and mobile business.

The chipmaker that also makes smartphones, components, TVs, and other home appliances confirmed best-ever quarterly operating profit of 14.07 trillion won in the quarter that ended in June.

The consolidated operating profit for the second quarter surged 42 percent against the previous quarter and 73 percent against the year-ago period. Sales jumped 20 percent on year to 61.0 trillion won. Both the operating profit and sales for the second quarter were slightly adjusted upwards from its earnings guidance released earlier this month.

For the first six months of this year, the company posted 23.96 trillion won in operation profit, jumping from 14.82 trillion won in the first half last year. Sales rose to 111.5 trillion won from 100.7 trillion won during the same period.

Its strong earnings were fueled by soaring memory chip demand from the rapid pace of digitalization and automation and tight supply.

The semiconductor division posted 8.03 trillion won in operating profit on sales of 17.58 trillion won in the second quarter.

The company predicted the strong demand in the memory chip, especially high value added products like mobile DRAM over 4GB and server DRAM over 64GB would continue throughout the year with launch of new premium smartphones and expansion of new datacenters while tight supply condition would remain. It is ramping up 64-layer V-NAND production at its Pyeongtaek fab to keep up with the growing demand.

The display business also fared well and posted 1.71 trillion in operating profit on sales of 7.71 trillion won in the second quarter. Premium display panels - both OLED and LCD - led the growth with its OLED business delivering improved quarterly earnings thanks to increased shipments of flexible displays for smartphones. The profitability of its LCD business improved with increased sales of high-end, large-sized UHD panels and stable price conditions. The company has an addition of new OLED production line planned in the third quarter that would weigh on profit in the upcoming period.

Its mobile business recovered some of its reputation dented by fire-prone Galaxy Note7 that led to largest-ever technology recall and eventual discontinuation of the phone.

It recorded 4.06 trillion won in operating profit on sales of 30.1 trillion won in the second quarter, both significantly improving from the previous quarter thanks to face-saving Galaxy S8 series that hit the market in April.

Its total smartphone shipment remained nearly the same from the previous quarter due to fall in sales of mid- to low-end models. The company is preparing to launch another premium model Galaxy Note8 and upgraded budget phones to combat challenges that are expected to get fiercer in the second half with the release of new models by competitors.

The consumer electronics division registered 320 billion won in operating profit and 10.92 trillion won in sales, both decreasing from a year ago period. The on-year decrease was mainly due to a spike in TV demand in the previous year with global sporting event and slowdown in the Chinese market. The spike in panel prices also weighed on the profit. Home appliance business also registered a fall in profit due to increased raw material costs and investment in the B2B market. But it expects a slight improvement in the second half with stabilization in panel price.

Separately, Samsung Electronics announced the third phase of its share buyback program that will repurchase and cancel 670,000 common shares and 168,000 preferred shares. The program will start on Friday, taking about three months to complete. In January, the company released a 9.3 trillion won worth share buyback program, and it has repurchased and cancelled 1.92 million common shares and 480,000 preferred shares amounting 5 trillion won in total as of July.

The company will pay out 7,000 won per share for both common and preferred shares for second-quarter dividend.

By Song Sung-hoon

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