Samsung 4Q profits top forecasts on Galaxy sales

"Even though they said demand for smartphone will slow down in the first quarter, Samsung will likely buck the industry trend and its own smartphone sales will go up," said Byun Han-joon, an analyst at KB Investment & Securities.

Apple, which keeps its iPhone price high, might see iPhone sales plateau in coming years as more consumers snap up cheaper Android phones.

Still, Apple's business has been more profitable because of the high price of the iPhone, which generates a larger profit per sales. Samsung, which makes dozens of handset models a year and customizes them for mobile operators, also sells cheaper smartphones and spends about three times more on expenses such as marketing and advertising costs to promote its Galaxy brand phones and televisions.

Counterpoint Research estimates Apple, though it sold fewer handsets than Samsung, took 70 percent of profit in the handset market during the fourth quarter, while the South Korean rival claimed 25 percent.

Samsung is expected to introduce a new flagship smartphone in its Galaxy S series as early as April, which analysts say will shore up its bottom line. The company said consumers seeking to replace its current handset and get a faster wireless connection through LTE networks will drive the demand for new models, easing concerns that sales would slow because of high rates of smartphone use in developed markets. Part of its strategy to command higher prices from consumers has been adding new hardware features, such as a digital pen in the Galaxy Note series.

Samsung's flexible display technology, which allows tablet computers to fold into mobile phones or bend the edge of the screen, is an effort to make its products stand out from others and to shore up its profit. But such technology, which was shown in public earlier this month in Las Vegas, will still need more time for mass production.

Samsung said its profit will be hurt by unfavorable foreign exchange rates this year. Robert Yi, head of Samsung's investor relations, said the negative impact from the foreign exchange rates will exceed 3 trillion won ($2.8 billion), with the loss largely coming from the firm's exposure to the euro.

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Youkyung Lee can be reached on Twitter: www.twitter.com/YKLeeAP