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Samsung emphasizes components as smartphones peak

Published on NewsOK Modified: July 26, 2013 at 12:15 am •  Published: July 26, 2013
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SEOUL, South Korea (AP) — Samsung plans to plow a record pile of cash into its semiconductor and display panel businesses, hoping to reduce reliance on sales of high-end Galaxy smartphones that are poised to peak after two years of blistering growth.

Samsung Electronics Co., the world's largest smartphone maker, reported record profit for a sixth straight quarter on Friday. But the result still disappointed investors who expected Samsung to book even higher earnings after the Galaxy S4, its latest iteration of the flagship smartphone, was launched in April. The handset scored 10 million sales in the month after its launch.

Samsung's division that makes and sells handsets, smartphones and tablet computers has been the motive force behind the South Korea company's run of bumper profits, with Galaxy smartphone shipments jumping every quarter. In the three months ended June 30, the division contributed two-thirds of the company's entire operating profit.

Samsung, which does not disclose its smartphone sales figures, is estimated by research firm IDC to have shipped 72.4 million smartphones in the April-June quarter, compared with Apple's 31.2 million iPhone sales. Samsung's second quarter smartphone sales were double what it sold in the final quarter of 2011, an indication of how fast the company expanded its business and outpaced rivals.

But investors who once cheered the explosive sales growth now fret that consumer appetite for top-of-the-range smartphones is close to being sated. Cutting-edge features have lost some of their luster as there is now a wide choice of new devices with equivalently fast processors, powerful cameras and crisp roomy displays.

Emerging markets remain a source of growth but the middle classes in such countries flock to cheaper smartphones that are less profitable for manufacturers such as Samsung and Apple Inc. They also face additional competition from Chinese companies that specialize in affordable handsets.

Samsung's share price has dropped 14 percent since January, cutting $30 billion from its market value. Robert Yi, senior vice president of investor relations at Samsung, blamed global economic conditions that prompted foreign investors to pull funds from Asian financial markets including South Korea.

But many analysts said weaker-than-expected sales and profit from Galaxy smartphones is the key factor behind the tumbling share price. Analysts including those at JP Morgan Chase cut their sales forecasts for the Galaxy S4 by more than 20 percent in June, predicting shipments would weaken after the first quarter it was on sale.

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