Samsung, the world’s largest maker of memory chips and mobiles, announced that it is expecting to earn $8.3 billion last quarter following a huge sale of about 500 mobiles every minute as well as the increased demand for flat screens for handsets, including the ratcheting demand of its closest rival Apple Inc.
The phenomenal record breaking 5-quarter run may end next after the upcoming January-March quarter as the company expects weaker consumer demand. However, the South Korean firm is optimistic that new smartphone releases and improving prices of memory chips will continue, easing concerns raised by investors about a possible weakening of earning growth this year.
Fund manager of LS Asset Management Kim Sung-soo said that many investors are worried that the earning growth of Samsung will not continue during the first 5 months of the year. He said that the smartphone market will not be able to sustain the growth as bigger markets are already saturated, and even as emerging markets are also growing.
The South Korean tech giant has outperformed the former number smartphone maker, Apple Inc, despite a strong launch of iPhone 5 in the United States. The strong sales momentum was provided by Samsung’s Galaxy Note II, its vaunted flagship “phablet”, during the last quarter. Analysts said that Apple’s sales of iPhone 5 was slightly below expected figures.
Samsung launched 37 variants of handsets globally, tweaking them to suit the tastes of different regional markets and consumer likings. Samsung phones varied from cheaper low-end units to more expensive high-end models. Apple, on the other hand, only released one smartphone. Other smartphone makers also released a number of their own smartphones, with Taiwan’s HTC Corp launching 18 models, LG Electronics 24, and Nokia 9.
Last Monday, HTC announced that its profit during the last quarter decreased significantly to 90 percent, even after it trailed Samsung Galaxy series and Apple’s iPhone in terms of sales.
The $230-billion Samsung revealed its guidance for October to December earnings last Tuesday, ahead of the planned earnings announcement on January 25.
The world’s best selling smartphone, the Galaxy S III, outperformed Apple’s iPhone 4S during the third quarter, although analysts said that total global sales slipped to 15 million from 18 million. But the strong sales of Galaxy Note II phablets, according to analyst estimates, covered the decreased sales figure of Galaxy S III, making the total sales of Samsung smartphones reach about 63 million.
Analyst from HI Investment & Securities Song Myung-sub said that Galaxy Note II’s strong performance helped boost Samsung’s last quarter profit, though Apple’s iPhone 5 sales were less spectacular.
“Samsung’s profit will drop in the current quarter because of decreased phone profits. It will launch the Galaxy S IV only in March or April so, without new models, phone sales prices will fall this quarter. For the whole year, Samsung will launch new models faster than Apple and have the upper hand in the smartphone market,” he added.
The next Galaxy handset is expected to become available in the next few months, and is said to feature an unbreakable screen , better camera, more powerful processor, as well as full high-definition quality resolution with 440 pixels per inch.
“Samsung’s smartphone shipments are likely to grow even in a seasonally weak first quarter. The early launch of the Galaxy S IV would drive second-quarter growth momentum,” BNP Paribas Securities analyst Peter Yu said. Yu also predicted that the South Korean company’s operating profit will increase 25 percent translating to $35 billion.
Neil Mawston, director at Strategy Analytics, predicted that Samsung will increase its smartphone sales by more than 30 percent to widen its lead over its number one rival, Apple Inc. He said that Samsung will sell around 290 million handsets this year, a significant increase from the 215 million predicted last year.
Kiwoom Securities analyst Kim Sung-in said that Samsung can reach a total of 320 million smartphone sales figure this year and can double its sales of tablets to 32 million.
The South Korean firm said that its operating profit increased 89 percent to 8.8 trillion won compared to last year, an increase from the expected 8.7 trillion won by 16 analysts who talked to Reuters. The figure is an 8.6 percent increase from the July-September at 8.1 trillion won.
Analysts think that profits coming from Samsung’s mobile division will double compare to last year, with a small increase from the previous quarter translating to 5.8 trillion won. As demand for memory chips and flat screens for mobiles began to take shape again, Samsung’s component earnings is also expected to increase.