Feature Article

January 25, 2013

Galaxy Sales Send Samsung's Fourth Quarter Profits Over the Top

An analyses shows that Samsung Electronics Co. shipped more than 60 million smartphones during the final three months of 2012. These included the popular Galaxy S III and the Galaxy Note II. This puts the total sales of Samsung smartphones over 200 million for all of 2013. In comparison, Apple said that it sold 47.8 million iPhone 5, 4S and 4 models in Q4 2012.

On its January 25, 2013 earnings call, Samsung announced that its quarterly profit rose 76 percent. The sales of Samsung’s Galaxy smartphones outsold the iPhone for a fourth straight quarter in 2012. The net profit for 2012’s fourth quarter is calculated to be 7.04 trillion. That translates to $6.6 billion and the 76 percent increase from 2011.

It would be interesting to see an actual head to head (and a true apples to apples, so to speak) comparison on sales of the Galaxy S III and the iPhone 5, but these numbers aren’t directly available. It is very much worth noting, however, the differences in total revenue between the two companies. Counterpoint Technology Market Research noted that Samsung took 33 percent of smartphone market share in the fourth quarter. In comparison, Apple had a 21 percent share. However, Apple also reported $13.1 billion in net profit compared to Samsung’s $6.6 billion – Samsung has a ways to go yet.

Nevertheless, net profit exceeded an expected 6.95 trillion won in net profits (about $6.43 billion). The increase in smartphone sales was the major reason for Samsung’s profit growth. Last year, Samsung overtook Apple as the top smartphone maker. Samsung said that its operating profit from smartphones and tablets more than doubled from fourth quarter earnings in 2011 of about $2.4 billion to $5.1 billion in 2012.

The increase in the overall demand for smartphones also benefits Samsung’s semiconductor products and display panels. Of course, Apple gave them a little help in this department since they use some of Samsung’s products in the iPhones. Sales of mobile processors that power devices such as Apple's iPhones and Samsung's own Galaxy smartphones boosted the bottom line.

The display panel division assisted in the fourth quarter profits. The division had strong sales of advanced mobile phone screens called OLED. They are mostly found in high-end Samsung smartphones.

The fourth quarter of 2012 saw record sales of mobile devices for everyone. The company does, however, realize that this trend does not continue into the following year. It expects its earnings to decline during the first quarter. There is typically a low demand for consumer electronics after Christmas. Most likely due to the fact that everyone did all their spending for Christmas and cannot really afford anything for a while. Because of this, Samsung is leaving its capital expenditure at $21.5 billion, which is the same as last year.

Analysts believe that Samsung will still continue to see a rise in smartphone sales this year. They believe that there will be more sales in the low and mid-priced models. This is an area where Samsung will not be facing competition from Apple. Analysts said that Samsung could be little affected by market demand thanks to its variety of products that range from affordable to expensive devices. Some analysts, including Young Park at Woori Securities, forecast Samsung smartphone shipments to rise as much as 50 percent this year from 2012 to over 300 million units.

At CES 2013 Samsung announced its prototype phones with flexible displays. It is also expected to introduce a new flagship smartphone in its Galaxy S series, possibly at the 2013 Mobile World Congress being held at the end of February. Samsung believes that consumers who are seeking to replace their current handsets and get a faster wireless connection through LTE networks will drive the demand for new models.

Edited by Brooke Neuman

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