Samsung are riding high on the crest of a wave at the moment, forecasting an operating profit of $5.9bn for the period Q2. The estimated second quarter profit is 14.5% higher than the previous record quarterly profit in the first quarter.
Samsung overtook Nokia as the world’s biggest maker of mobile phones earlier this year and with units of Galaxy S3’s flying off the shelves and the launch of Android Jelly Bean 4.1 late in June 2012, it is expected that profits will rise even further in coming months.
Nho Geun-Chang, an analyst with HMC Investment Securities stated “Earnings will be stronger in the current quarter, as sales of the high-end Galaxy S3 will increase dramatically and drive up the telecom division’s earnings. We estimate shipments of the Galaxy S3 will reach 19 million units in Q3”.
Since its launch in May 2012, sales of the Galaxy S3 have been nothing short of remarkable, with Samsung’s head of mobile phone division, Shin Jong-kyun stating they expect to have sold 10 million units of the model by July. This is despite a reported shortage of parts which resulted from the intense demand for the product.
However, the widely-expected launch of the latest version of the Apple iPhone later this year might dampen sales somewhat, with analysts predicting an impact on Samsung’s Q4 profits as a result.
The impact of the release of the latest version of the Apple iPhone will be just the latest of the continuing battle between Samsung and Apple. Both companies are still involved in a number of legal disputes over patent infringements across the world.
Whilst much of the jump in profits has been attributed to the release of the Galaxy S3, analysts also point out their success in all ranges of the market. Roberta Cozza of research firm Gartner said “At the high end of the smartphone market, Samsung has been the only one who has been a very good and viable alternative to the iPhone. But Samsung’s success is not just coming at the high end. Over the last three quarters they’ve introduced Galaxies at the lower end, so it’s their ability to sell at all different price points’.
However, whilst strong handset sales grab the headlines, more than doubling profit growth, other parts of the business, such as chips and consumer electronics are battling weak prices and demand as well as the effect of the weak euro. Demonstrating the significance of the euro zone crisis, Samsung executives said this week the group was operating to a contingency plan. An un-named executive is quoted as saying the company may need to initiate cost cuts and product price increases should the euro fall further.
However, Brian Park, an analyst at Tongyang Securities has stated the impact overall should not be too significant on Samsung’s overall performance. “A sharp drop in the euro could hit Samsung’s TV and home appliance sales as the region traditionally generated some 30 of (consumer electronics sales). If you take European sales alone, TVs may have swung to a loss…but the division as whole is profitable and is a very small part of Samsung’s entire profit structure”.