Strong technological leadership has helped Samsung to eclipse its chip-making rivals

Samsung's computer chips bring it back to profit growth

Samsung has announced its first profit growth in more than a year following strong sales of its computer chips.

The Korean technology giant made $6.4bn (£4.1bn) in operating profit this quarter, an increase of over $2bn on this time last year.

The company has been struggling in recent times with waning global smartphone sales and strong competition from Apple and Chinese rival Huawei.

Samsung said it aimed to keep fourth-quarter mobile profits at a similar level, although the outlook beyond that was unclear as it expected the global smartphone market to slow in 2016.

The company intends to use some of the profits to launch an 11.3tr won (£6.5bn) share buyback and planned to give shareholders 30 to 50 per cent of its free cash flow over the next three years, primarily through dividends.

"Samsung's core smartphone business is struggling, which means the shares would likely fall. The buyback helps defend the stock price," said Chung Sun-sup, head of corporate analysis firm

Despite faring relatively poorly in smartphone sales in recent times, the mobile division also posted its first on-year profit growth in two years, climbing 37 per cent to 2.40tr won.

This was largely attributed to strong sales of the Galaxy Note 5 as well as new lower-end products.

The Financial Times reports that the recent success of Samsung’s chip business is down to its technological leadership in memory chips which has given it cost advantages over rivals while boosting its market share. It has also benefitted from lucrative contracts to produce logic chips for customers such as Qualcomm and Apple.

In 2016, the company included its Exynos 7420 processor in the western models of its flagship smartphone the Samsung Galaxy S6 marking a change from previous years which used chipsets from Qualcomm’s Snapdragon line up.

The decision to use home grown chips followed widespread reports of overheating in smartphones using Qualcomm’s latest Snapdragon 810 chipset such as phones from HTC and Sony.

Last month, reports circulated that Samsung was considering cutting 10 per cent of its workforce at its headquarters. The company later denied the reports, but admitted it would freeze salaries this year.

Yesterday, the company’s largest rival, Apple, announced that 2015 had been its most successful year ever after making a reported $234bn.

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