Samsung profits driven by mobile growth

Samsung's mobile phone sales were up 54 percent in the last three months of 2011, balancing weaker demand for PC memory and disaster-blighted supply chain problems
Written by Ben Woods, Contributor

Mobile and chip manufacturer Samsung performed well in its fourth quarter, thanks to a strong showing from its range of smartphones, but its chip business showed a small sequential decline.

The company increased mobile phone sales by 54 percent during the last three months of 2011, with an operating profit for the period of 5.3 trillion won (£3bn), Samsung said on Friday in its latest financial earnings report.

Alongside the rise in devices sold, Samsung also reported a higher average selling price (ASP) for its smartphone ranges — largely comprised of handsets in its Galaxy range, such as the Galaxy S2. In total the telecoms unit took an operating profit of 2.64 trillion won.

"Despite intensified competition amid the global economic slowdown, our telecommunications businesses continued to post solid earnings with an enhanced line-up of high-end smartphones, resulting in higher ASP," Robert Yi, senior vice president at Samsung, said in a statement.

However, Francisco Jeronimo, mobile analyst at IDC, said that while smartphone performance was impressive, the feature phone and mid-market segment is equally important to the company.

"The results are extremely impressive. It shows how strong they are in the premium segment but also how much the mid-market is important," Jeronimo said. "The feature phone market is still very important, particularly with Nokia's decline in the last quarter in emerging markets, particularly China."

Despite their lower ASP, Jeronimo said that feature phones play a key part in attracting business away from Nokia in emerging markets as they play a key role in driving volume and awareness.

Carolina Milanesi, mobile analyst at Gartner, agreed with Jeronimo. "If Samsung wants to go after Nokia for the number one spot, it will have to be more aggressive in emerging markets and that certainly comes at a price," she said. "This is the issue that Motorola, HTC, RIM all have had in their move to expanding market share."

The company's semiconductor business saw profits jump by 29 percent to 2.3 trillion won, despite year-on-year sales in the unit falling by 1 percent. The decline was partially caused by low demand for PC DRAM, combined with a disruption to the hard-drive supply chain. However, growth in the tablet and smartphone market drove constant demand for NAND chips and solid-state drives (SSDs), Samsung said, adding that these factors are expected to continue through the next quarter.

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