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Thanks to the launch of its flagship smartphone Galaxy S6, Samsung Electronics has shown an increasing trend in operating profits for two quarters in a row. For the semiconductor sector that supported its performance last year, the company decided to maintain the strategy of so-called super disparity by investing 10 trillion won (US$9.36 billion) this year.
Samsung Electronics announced on April 29 that the company recorded 47.12 trillion won (US$44.12 billion) in sales and 5.98 trillion won (US$5.6 billion) in operating profits in the first quarter this year. While sales decreased 11 percent compared with the previous quarter, operating profits increased by 13 percent. The drop in sales is largely due to a business slump in the consumer electronics (CE) division, including TVs.
The most noticeable change is a rebound in the IT and mobile (IM) division, including smartphones. As operating profits increased nearly 40 percent to 2.74 trillion won (US$2.57 billion) in the first quarter this year from 1.96 trillion won (US$1.84 billion) in the previous quarter, the company is considered prepared to counterattack in the smartphone market.
In addition to the Galaxy S6, other mobile devices saw a growth in sales, improving operating profits. Lee Myung-jin, IR director at Samsung Electronics, said, “The sales of cellphones in the first quarter of this year amounted to 99 million units, and smartphones accounted for the middle 80 percent of total sales.” In fact, Strategy Analytics (SA), a market research firm in the U.S., announced that Samsung Electronics sold 83.2 million units of smartphones during the same period, and it became the outright leader with a 24 percent share in the global market after overtaking Apple with an 18 percent market share. Samsung Electronics expects that the company will maintain a similar level of smartphone sales in the second quarter, but the average sales price (ASP) will increase due to the release of the Galaxy S6.
The semiconductor also kept the upward trend in performance from last year. Despite being off-season, it posted 2.93 trillion won (US$2.74 billion) in operating profits in the first quarter, which was the highest figure in 4 years and 6 months. Memory semiconductors continued to see demand in mobile devices and servers, and system LSI, a non-memory semiconductor, saw an improvement in performance owing to the mass production of a 14-nanometer mobile application processor.
Samsung Electronics decided to steadily increase its investment in the semiconductor sector. Director Lee said, “The company invested approximately 10 trillion won [US$9.36 billion] in memory semiconductors last year, and will make a similar level of investment this year in consideration of the market demand.”
Meanwhile, the CE division recorded 140 billion won (US$131.07 million) in operating losses, showing a loss over 4 years and 3 months. The company said that unfavorable conditions all occurred at once as the first quarter was a seasonally off-season for the division and its demand decreased due to the falling exchange rates of the euro and emerging countries. Also, the cost of materials increased, due to the strong dollar.