Samsung profits rise 81% boosted by smartphone sales

Image representing Samsung Electronics as depi...

Image via CrunchBase

Samsung
Electronics has reported its highest quarterly profit since 2008,
boosted by smartphone sales and increased profitability at its display
panel unit.

Image of Samsung i5700 Galaxy Spica mobile phone

Image of Samsung i5700 Galaxy Spica mobile phone (Photo credit: Wikipedia)

Net profit was 5.05tn won ($4.5bn; £2.8bn) in the quarter ending 31 March, up 81% from 2.78tn won last year.

The success of its Galaxy range had seen Samsung become the world’s biggest-selling mobile phone maker.

Samsung is also the world’s biggest TV and flat screen maker.

“We cautiously expect our earnings momentum to continue going
forward, as competitiveness in our major businesses is enhanced,” said
Robert Yi, head of investor relations at Samsung.

Bright future

The firm said its IT and mobile communications division, which
manufactures the smartphones, made an operating profit of 4.27tn won
during the period, as revenues in the division surged 86% from a year
earlier.

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Samsung will unveil the latest version of its Galaxy range of phones on 3 May.

“The smartphone market has almost only two players, Samsung and Apple,” said Lee Sei-Cheol of Meritz Securities.

“Since its Galaxy3 phone is being unveiled in May, Samsung will keep enjoying sales growth in its mobile phone division.”

In a separate report published on Friday, Strategy Analytics
said that Samsung had become the world’s top mobile phone seller by
volume in the first quarter, with a global market share of 25%.

Global mobile handset shipments (Q1)

Company Units (millions) Market share
Source: Strategy Analytics
Samsung 93.5 25.4%
Nokia 82.7 22.5%
Apple 35.1 9.5%
Other 156.7 42.6%

Profit call

Global demand for smartphones is expected to increase further
in coming years, with research firm IDC forecasting that global
smartphone shipments will rise by a third to 659.8 million units in
2012.

Continue reading the main story

Start Quote

Samsung’s handset earnings may weaken in the latter half of this year, with the possible launch of Apple’s iPhone 5

End Quote
Brian Park
Tong Yang Securities

Analysts said that given its
robust growth and dominance in the sector, Samsung was well placed to
benefit from this growth and boost its market share.

However, given the robust growth in the sector, other
smartphone makers are also keen to introduce new products and tap into
the fast-growing market.

Samsung is facing stiff competition from rivals such as US-based Apple, Finland’s Nokia, and Taiwan’s HTC.

Apple, which said earlier this week that it sold 35 million
of its iPhones in the first quarter, is expected to launch a new version
of its handset later this year.

Analysts said that as more models are launched, manufacturers
may have to the cut price of their handsets in a bid to attract
consumers, a move that may see profit margins shrink.

“Samsung’s handset earnings may weaken in the latter half of
this year, with the possible launch of Apple’s iPhone 5,” said Brian
Park of Tong Yang Securities.

Chip troubles

Another area of concern for Samsung is likely to be its chip
manufacturing unit, which has been hurt by slowing global demand for
personal computers.

Models showing Samsung Galaxy phones

The success of Galaxy range of handsets has helped Samsung offset falls in other units

The firm is one of the world’s biggest makers of dynamic
random-access memory (DRAM) chips, which are widely used in personal
computers.

However, demand for these chips has been declining as consumers turn to tablet PCs, which mostly use flash memory chips.

At the same time, falling prices have also hurt profitability in the sector.

Samsung’s memory-chip division saw its profits slide by 54%
during the first quarter when compared with the same period a year
earlier.

The company said it expected the demand for DRAM chips to
rebound in the coming months, but warned that growing competition in the
sector “will lead to a price decline”.

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