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Samsung soars to $5.9bn profit driven by Galaxy smartphone demand
Samsung's profits soared in its second quarter thanks to stronger than expected sales of its Galaxy S3 smartphone, despite parts supply problems and issues with maintaining stock levels at retailers. The South Korean firm's other businesses struggled however, with its chips and consumer electronics businesses feeling the economic pinch in Europe.
All told, Samsung's operating profit for the second quarter period is estimated to hit 6.7 trillion Won ($5.9bn), a 79% increase over the same quarter last year. Revenue is expected to hit 47 trillion Won ($41.4bn) for the period, slightly below analysts' estimates of 50 trillion Won.
The company's full second quarter results will be released towards the end of the month but it's expected to reveal Samsung sold around 50 million handsets, with its flagship Galaxy S3 expected to hit 19 million during the April to June period.
"Our smartphones are flying off the shelves, with some outlets reporting 40% to 60% sales growth, but that's distorting the overall trading outlook, which is more challenging due to the weak global economy and a weak euro," said one unnamed executive speaking to the Telegraph.
Whilst the handset business looks stronger than ever, the dire situation the firm is experiencing in the EU marketplace due to the Euro zone crisis, weak prices, demand, as well as an even weaker Euro is further highlighted by the announcement that it's operating to a contingency plan.
"Europe is our biggest consumer electronics market and we may have to initiate cost cuts and product price increases should the euro fall further from the current level," the Telegraph's source said.
Apple is likely to continue with last year's release cycle and announce its next-generation smartphone later this year, which will impact handset sales. But Samsung will also enjoy heightened demand for its chips as a supplier for iPhone and iPad products. They also supply Apple with memory chips, NAND flash and displays.
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User Comments: 5
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"They also supply Apple with memory chips, NAND flash and displays." With the lawsuits from Apple you would think Samsung could just stop the flow of products to Apple fab plants, it would be interesting to but likely not going to happen. Imagine, oh your suing us cause we use the same parts in our products, okay, find a new supplier... Good to see Samsung's bottom line isn't being affected too badly with the ban in the US.
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Raswan said:
"They also supply Apple with memory chips, NAND flash and displays." With the lawsuits from Apple you would think Samsung could just stop the flow of products to Apple fab plants, it would be interesting to but likely not going to happen. Imagine, oh your suing us cause we use the same parts in our products, okay, find a new supplier... Good to see Samsung's bottom line isn't being affected too badly with the ban in the US."They also supply Apple with memory chips, NAND flash and displays." With the lawsuits from Apple you would think Samsung could just stop the flow of products to Apple fab plants, it would be interesting to but likely not going to happen. Imagine, oh your suing us cause we use the same parts in our products, okay, find a new supplier... Good to see Samsung's bottom line isn't being affected too badly with the ban in the US.It would be pretty cool to see the meltdown, and how quickly Apple could recover. But you're right, never gonna happen, at least partly because even if they don't give a rip about Apple, it would scare away the other people for whom Samsung makes shit.
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Leeky said:
Not only that, but the pure and simple fact that Samsung makes a shed load of money off the back of Apple's iPhone and iPad would make it a no go. Besides, once the iPhone comes out later this year and sales start to slacken on the SGS3, Samsung will still be earning money on every single handset sale they lose out on to Apple -- that's a whole lot better than getting absolutely nothing like other phone makers will.
All said and told, Samsung is in a great position in the handset market and I don't see its grip loosening any time soon.
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It's odd that Apple will use a customized Samsung Exynos 4 architecture for the Apple A6 SoC, but is moving the fab work from Samsung in Texas to TSMC because of their shoddy relationship, if I'm not mistaken. Someone correct me if I'm wrong.
What I didn't find was if Apple will continue to use Samsung for the displays on their next devices.
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Samsung could cut sales to apple but since they make a boatload of money off it, it's unlikely. If they did, it would absolutely cripple aapl since Samsung parts are used in every single one of their products (sometimes accounting for over half of the total cost of manufacture). Samsung would also take a hit but nowhere near the scale that would cripple apple.
Let's not forget they make a lot more than just electronics. Pharmaceuticals and engineering/construction among others come to mind...
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