Samsung Electronics faces a challenging outlook after reporting its third consecutive fall in quarterly profit as it struggles to gain ground on Apple Inc and deal with a tepid recovery in its TV and flatscreen business.
However, the world’s No. 2 handset maker said its mainstay memory chip business was rebounding after Japan’s devastating earthquake and tsunami last month hobbled production from rivals including Toshiba Corp.
“Although the memory chip business is reviving, other operations such as telecommunications and displays are facing tough times ahead,” said Han Se-woong, a fund manager at AssetPlus Investment Management, which owns Samsung shares. “Its race with Apple seems pretty difficult and income in its display division is in a slump.”
Samsung’s Galaxy model smartphones and tablet computers were seen among the biggest potential rivals to Apple’s iPhone and iPad, but it has been unable to match the US company’s roaring sales growth.
Sony plans to soon join the fray with the launch of its first tablets in a market set to quadruple in four years.
Samsung is also the world’s largest maker of memory chips, flat screens and televisions. It reported a 2.95 trillion won (US$2.75 billion) operating profit for January to March compared with the consensus forecast for a 3.1 trillion won profit by Thomson Reuters I/B/E/S.
That was in line with Samsung’s estimate for an operating profit of between 2.7 trillion won and 3.1 trillion won.
Samsung, which had negligible share of the smartphone market until early last year, has muscled in with its Galaxy models. It has since sold 14 million Galaxy S smartphones and launched the Galaxy Tab tablet in three different sizes.
The company sold around 70 million handsets in the first quarter including tablets. It did not give breakdowns and analysts estimate it sold around 1 million tablets. Apple sold 4.7 million units of its iPad last quarter.
Soaring demand for tablets and smartphones is likely to fuel further growth at its semiconductor business, as Samsung counts Apple as its biggest client.
Prices of computer memory chips have rebounded since last month’s earthquake and tsunami in Japan.
Samsung said the chip market would improve slightly in the current quarter and demand for NAND flash chips would also sustain growth momentum thanks to solid smartphone and tablet markets.
Its television and appliances unit reported an 80 percent drop in profit to almost break even, while the flatscreen division swung to a 230 billion won loss from a 490 billion won profit a year ago.
Sales of flatpanel TVs edged up 5 percent from a year ago, but tumbled 31 percent from the previous quarter to 8.8 million units.
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