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Technology

Samsung mobile phone business surges thanks to Huawei's woes

World's leading smartphone maker plans more foldable handsets, predicts memory chip recovery

SEOUL -- Samsung Electronics' mobile business enjoyed surging profits in the third quarter thanks in part to the U.S. clampdown on Chinese rival Huawei, though the South Korean tech giant's overall performance was weighed down by poor performance in its chip unit.

Samsung, the world's largest smartphone maker, announced Thursday that operating profit from its mobile and network operations rose 31.5% to 2.9 trillion won ($2.5 billion) in the third quarter from a year ago. Quarter-on-quarter, it jumped 87.2%.

Overall, Samsung's operating profit plunged 55.7% to 7.8 trillion won in the third quarter year-on-year, with sales falling 5.3% to 62 trillion won during the same period, due to a global slump in memory chip prices.

"Sales of Note 10 and A-series were robust, raising smartphone's performance compared to the previous quarter," said Lee Jong-min, a vice president at the company, during the conference call. "The Galaxy Note 10 gained a warm reaction from the market with its sophisticated design and upgraded technology."

Samsung also said that the initial production of its foldable smartphone, Galaxy Fold, had sold out quickly despite the technical issues that initially beset the device. The phone is firmly in the high-end price range, selling for around $2,000. The company said it will launch new foldable models soon with an eye toward leading the new premium market.

Analysts say that Samsung benefited from the headwinds facing Huawei. The U.S., citing security concerns due to its alleged connections to the Chinese Community Party, slapped a trade ban on the Shenzhen-based company in May.

"Samsung's new A series effectively took advantage and boosted sales volumes. This was possible because Samsung had a product portfolio that closely matched the target price range of [Huawei's] mid-to-low price lineup," said Lim Su-jeong, an analyst at Counterpoint Research. "In some cases, the value for money proposition was so high that making the switch was quite logical for the practical user."

Lim said that the U.S. trade ban affected Huawei's global smartphone sales badly, particularly in Europe. Sales of Huawei's Honor devices, which are priced mainly in the $180-$249 price range and account for a large portion of sales outside of China, dropped significantly, she noted.

But while its smartphone sales surged, Samsung's semiconductor business suffered from the ongoing memory chip slump, with operating profit falling 77.7% on the year to 3.1 trillion won in July-September. Quarter-on-quarter, it dropped 10.3%.

Samsung said however that Chinese customers increased their purchases of DRAM chips in the third quarter due to worries that the U.S.-China trade war will linger. Samsung said it expects this trend to continue in the fourth quarter, helping it come out of the slump.

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