Samsung Electronics Posts Record Earnings Again

Samsung Electronics achieved record earnings in the third quarter of this year with operating profit of over W10 trillion (US$1=W1,061), the first Korean business to achieve the feat.

Samsung on Friday said third-quarter sales totaled W59.84 trillion and operating profit W10.16 trillion, with an operating margin of 17.2 percent. Yet the Korean electronics giant is fretting as the global smartphone market shows signs of slowing.

Samsung's mobile phone division was the single biggest earner, generating W36.57 trillion in sales and an operating profit of W6.7 trillion, which accounted for 66 percent of the firm's overall operating profit.

The company sold 86 million smartphones in the quarter and 10.5 million tablet PCs. It was the first time Samsung's quarterly smartphone output surpassed 80 million and tablet PC output jumped past 10 million.

Kim Hyun-joon of the company's mobile division said in a conference call that smartphone sales in the third quarter grew in the mid 10-percent range while tablet PC sales rose in the mid 20-percent range.

Analysts expect Samsung's stellar performance to last until the first quarter of 2014. After that they are not so sure. Even Samsung staff say they are not optimistic about earnings beyond the first quarter of 2014 if external conditions change.

The company's mobile phone division, in particular, is none too optimistic about market conditions next year. The Korean market has already reached saturation point, and market researcher Strategy Analytics projects it will shrink to 26.3 million units this year after peaking at 30.7 million in 2012.

Samsung accounts for a 70-percent share of the domestic smartphone market, and the sales growth of premium smartphones costing more than US$300 has already started to slow around the world, from 59 percent in 2011 to 26 percent in 2012. By 2014, it is projected at a meager five percent.

This means that Samsung, which dominates the premium smartphone market along with Apple, will find it increasingly difficult to maintain a high operating margin.