Samsung Electro-mechanics Co., the electronic part making arm of Samsung Group, is expected to see its earnings improve this year from a year-long cost-cutting efforts and addition of steady income as the result of Samsung Electronics Co.’ acquisition of automotive electronics company Harman International Industries.

Based on the forecast of a number of local brokerage houses, Samsung Electro-mechanics is expected to post 195.4 billion won ($171 million) in operating income on sales of 6.3 trillion won this year. An increase in sales from last year would be marginal, but this year’s operating profit would be seven times higher than last year’s.

The maker of substrates and camera modules for mobile phones that relies more than 60 percent of its sales on Samsung Electronics posted an operating loss of 46.5 billion won and sales of 1.3 trillion won on a consolidated basis for October-December period last year following the discontinuation of the fire-prone Galaxy S7 Note.

The company’s income statement would improve from retrenchment since September 2015 through business downsizing and reduction of 1,311 employees. It spent 50 billion in the first half of last year and 30 billion won in the second half for restructuring manpower, a move that is expected to enhance the company’s management efficiency and boost the company’s operating profit by 80 billion won this year, said Park Won-jae, an analyst at Mirae Asset Daewoo Securities Co.

Samsung Electro-mechanics is also expected to benefit from Samsung Electronics’ acquisition of U.S-based automotive electronics maker Harman International Industries as the electronics parts company produces multilayer ceramic capacitors (MLCC) used for making automotive electronics. After Samsung Electronics and Harman International complete the deal, Samsung Electro-mechanics will likely provide its MLCCs to Harman International. It is also expected to supply electric chargers while Samsung Electronics will likely focus on the development of in-vehicle infotainment systems and other affiliates to produce screens and batteries. The revenue from the division overseeing MLCC and chargers takes 33.3 percent of the firm’s total sales as of the fourth quarter 2016.

Moreover, with growing production of dual camera phones by Chinese smartphone makers, the Korean electronics parts maker that manufactures camera modules is expected to see its dual camera sales rise further. As the dual camera has also emerged as one of key parts in self-driving cars, the company plans to up its efforts to expand its supply to global automakers. The DM division manufacturing camera modules is responsible for 44.6 percent of the firm’s total sales. IBK Investment & Securities forecast sales from the company’s DM division to jump 31.5 percent in the first quarter this year from the fourth quarter last year.

The division that makes various electronic substrates including those for mobile devices, however, is expected to continue to post losses this year.

On Wednesday, shares of Samsung Electro-mechanics ended flat at 59,900 won from the previous session.

By Moon Il-ho

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