Samsung posts record quarter despite handset price war
Smartphone push urgent as cellphone prices fall, memory and screens key engines
Published: 30 July, 2010
READ MORE: Financial | South Korea | Samsung | Semiconductor | Handset
Hard on the heels of Motorola, Samsung announced record second quarter, up 83% year-on-year to KRW4.28 trillion ($3.61bn). However, despite the launch impact of its Galaxy S Android family, its first serious assault on the open smartphone sector, this was too late to affect Q2, and handsets actually weighed on the profit figure, with the surge coming mainly from memory chips and LCD screens. Total Q2 sales were up 17% to KRW37.89 trillion.
The group profit result beat Samsung's previous all-time high of KRW3.99 trillion set in the first quarter of this year. The company also reported record operating profit of KRW5.01 trillion, all of which puts it in a strong position to invest in its ambitious strategy to expand its handset range and distribution.
Robert Yi, head of investor relations, said in a statement: "In the second quarter, our component businesses performed very strongly, yet it was a more challenging quarter for our set businesses" (phones, TVs and appliances). The smartphone boom may not deliver significant growth for Samsung's mobile unit until Q3 or later, as its Galaxy S takes hold, but it is already boosting sales of Flash memory chips, a key element in the chip unit's strong performance.
Handset shipments were up 22% year-on-year to 63.8m units with the US and emerging markets the key growth regions. But average selling prices fell amid intense price competition, making it urgent that Samsung shifts its product balance further towards the high end. Like Nokia and unlike most other rivals, its economies of scale and broad channels enable it to compete profitably at the low end, but so far it has been a small player in smartphones. It launched its first Android range, Galaxy, last year, but this was an also-ran product, unlike the significantly revamped Galaxy S. Other key offerings include the Wave, which features Samsung's own operating system bada and the first Super AMOLED screen, plus Samsung's high end but proprietary mediaphones.
The decline in ASP and a fall in the euro reduced profitability in the handset unit and Yi warned that price competition in the mobile and digital media industries will make it hard to sustain the quarter's profit levels going forward.
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