Samsung Electronics Co Ltd has sent a clear message to rivals Intel Corp and Nokia Corp, after tripling its second-quarter profits thanks to strong sales of memory chips and flat screens. Yet the electronics conglomerate tempered market enthusiasm with a cautious second-half outlook.
For the second quarter, Samsung revealed that net income tripled to KRW 3.13bn ($2.68bn), up from KRW 1.13bn ($970m) in the year-ago quarter. Sales also rose 52.3% to KRW 14.980bn ($12.86bn).
Samsung’s best performing division was its semiconductor business, which had a very strong quarter with operating profit margins of 43%, mainly thanks to a price increase in DRAM chips. The company has also benefited from the increase in sales of flash memory chips, popular in-camera phones, and digital cameras.
Sales of Samsung’s mobile phones only slightly increased in the second quarter, but its profit margin slumped to 16% from 26%, hit by tougher competition in the US market and higher marketing expenses linked to the Athens Olympics in August
The Suwon, South Korea-based company is the world’s third largest mobile handset maker and is releasing a number of new models in the third quarter that should help to increase sales. It has also raised its yearly sales target to 86 million handsets, up from 65 million. This is in marked contrast to a dire forecast from rival Nokia.
Samsung’s LCD business saw a 25% rise in sales and operating profit, despite some concern about potential oversupply. It warned that LCD prices may fall between 10% and 20% during the second half of the year because of increased supply. As a result, Samsung cut its forecast for global shipments of LCDs geared for notebook computers and televisions.
Looking forward, there are some concerns regarding the prospects of the second half of the year. Although the second half of the year is usually the stronger, experts are concerned over signs of an economic slump and the possible oversupply of items such as LCDs, all of which could hurt the Korean chipmaker.
Samsung itself has admitted the tough conditions. Starting from last June, there are signs of a slowing economic growth, slowing supply of semiconductor and LCD, and even fiercer competition in almost all sectors, said executive Joo Moo-shik. However, we are confident we could overcome those hurdles.