Samsung Electronics Co yesterday said its first-quarter profit jumped to a record high, as smartphone sales remained strong despite the launch this month of an updated version of its flagship Galaxy phone.
Sales of consumer electronics usually slow in the first three months of the year after the holiday shopping season, an effect that analysts thought would be compounded by this month’s release of the Galaxy S4 smartphone since many delay buying until the newest model is available. Apple Inc has cited the upcoming release of a new iPhone as a reason for a slowdown in sales of older models.
Samsung began sales of the S4 in the South Korean market yesterday and starts US sales today. Analysts expect Samsung’s profits to reach new highs in the second and third quarters if S4 sales are strong. Lee Don-joo, head of sales and marketing at Samsung’s mobile division, said sales of the S4 would outdo its predecessor, the Galaxy S III.
Samsung said January-March net profit surged 42 percent to 7.2 trillion won (US$6.5 billion) from 5 trillion won a year earlier. That increase was despite booking a one-time charge against earnings related to settlement of its intellectual property battle with Apple. Analysts estimated the charge at US$600 million.
Sales rose 17 percent to 52.9 trillion won. Operating profit was up 54 percent to 8.8 trillion won, in line with its preliminary results released earlier this month. Profit was up 2 percent from the previous quarter’s result, beating market expectations of a fall.
As the S4 goes on sales several months before rival Apple introduces a new version of the iPhone, analysts said Samsung’s streak of record-setting profit will not stop any time soon.
“You can say it is like a snowball is rolling,” said James Song, head of technology at Daewoo Securities.
Song forecast that Samsung’s second-quarter operating income would surpass 10 trillion won.
Market research firm IDC estimated that Samsung shipped 70.7 million smartphones during the first quarter, up 61 percent over a year earlier and capturing 33 percent market share. Apple, the second-largest smartphone maker, sold 37.4 million iPhones. Its market share fell to 17 percent from 23 percent a year earlier, IDC said.
Samsung is also the world’s largest maker of memory chips, televisions, mobile handsets and LCD panels. The company’s strong performance in the mobile market helped offset sluggish demand for TVs and a still weak recovery in display panel sales.
For the first time in recent years, Samsung refrained from increasing its annual capital expenditure on semiconductor and display panel production lines, a sign that it sees slower growth in demand for memory chips and display panels. Its capital expenditure for this year will be capped at 22.9 trillion won.
However, Samsung said it would boost its spending on research and development (R&D) even though it is already one of the largest R&D spenders. Its R&D expense was US$2.97 billion during the first three months of this year, nearly three times more than Apple’s US$1.12 billion, financial information provider FactSet said.
“Although market uncertainties from the European crisis and the slow global economic recovery are still lingering, we expect to increase R&D spending for strengthening our competitiveness ahead of planned new product launches,” said Robert Yi, head of investor relations at Samsung.