It's been less than four months since Samsung was forced to issue an embarrassing recall of the Note 7, but the company has announced that it is expecting a big increase in year-on-year operating profit for the fourth quarter of 2016. In Q4 earnings guidance, Samsung said it was expecting a consolidated operating profit of 9.2 trillion won (about $7.2 billion) for the period — almost double the 6.14 trillion won (about $5.2 billion) in profit it received in the same quarter last year.
If accurate, the guidance indicates that Samsung's costly recall of its Note 7 smartphone was only a temporary blip in the company's financial situation, rather than a lingering hit to consumer confidence. That's not to say that the Note 7 didn't have an effect, but that it appears its major financial repercussions on the wider company may have been confined to the third quarter of 2016. Samsung had originally predicted a year-on-year profit growth for Q3 this year, but had to revise those estimates after it issued a full recall of the Note 7, slashing profit expectations by a third. The actual figures bore those revised expectations out, with Samsung earning just 5.2 trillion won (about $4.4 billion) for Q3 2016, having previously expected some 7.8 trillion won (about $6.6 billion). The new guidance, suggests that the company is in line for its strongest quarterly profit in three years, beating market expectations. Analysts noted that, with the Note 7 off the market, the mobile division still did reasonably well off the back of older Samsung phones like the Galaxy S7 — an indicator that the upcoming S8 could do well at market. But as other analysts noted, unlike 2013's previous profit high, Samsung's apparent Q4 success would not be driven by the mobile division, but by sales of memory and screens, as well as the devalued Korean won against the dollar. Samsung's Note 7 recall may not have caused as much damage financially as expected, but the company still has something to prove with its next major phone release. Samsung Electronics Co Ltd has set an initial production target of 10 million Galaxy S8 smartphones, South Korea's Electronic Times reported on Thursday, citing unnamed sources.
Samsung is counting on the S8 to rejuvenate sales after it scrapped the Galaxy Note 7 smartphones last year in one of the biggest product safety failures in tech history.
The firm has yet to disclose what caused some Note 7 phones to catch fire on their own. The newspaper said Samsung would start production of the Galaxy 8 in March and planned to start selling them in April. Galaxy S7 phones went on sale in March last year.
Last week Samsung Electronics’ supply chain had begun to receive orders for components to produce the upcoming Galaxy S8 flagship phone. Initial production was expected to be 10m units for the pre-release build but no full shipment targets were revealed. South Korean trade press has indicated however, that Samsung has set a shipment target of 60m units, 25% higher than the Galaxy S7 and 33% higher than the Galaxy S5 and S6. Samsung’s optimistic view, despite the phones later than normal release, comes at a time when the high-end smartphone market has seen slowing growth, particularly as the world’s largest smartphone market, China, is becoming saturated.