Published : Jan. 8, 2015 - 22:17
Samsung Electronics on Thursday posted an operating profit of 5.2 trillion won ($4.7 billion) for the fourth quarter, up 28 percent from the previous quarter when the company suffered an almost 60 percent on-year fall in profits.
The earnings figure also beat analysts’ 4.7 trillion won average estimate as complied by local market researcher FN Guide.
Industry watchers cited strong demand for its chips and a weaker Korean won as the key factors behind the Korean tech giant’s higher-than-expected profits.
“A weaker won affected the company’s earnings positively, especially its strong chip sales that are paid mostly in U.S. dollars,” said Lee Seung-hyuk, an analyst at Korea Investment and Securities. The exchange rate ended at 1,099.9 won per dollar on Thursday.
“Spending in the mobile division was not as high as expected. Cost cuts, rather than actual sales increase, also contributed to better profits.”
But analysts added it remains to be seen whether Samsung, which has been struggling with the shrinking profit margins for smartphones, will continue to maintain the latest upward trend this year.
Like other global manufacturers, Samsung, the world’s No. 1 handset maker, has suffered from declining margins and growing saturation in the smartphone market in recent years. Especially in China, the once-dominant Samsung lost ground to a nimble startup Xiaomi last year.
Samsung's new SUHD TVs are displayed at the 2015 International CES, a trade show of consumer lectronics, in Las Vegas, Nevada, on Tuesday.(Yonhap)
According to the company, the fourth-quarter profits are down 37 percent from the same period last year. Sales in the quarter are also expected to be lower, falling 12 percent to around 52 trillion won from a year ago.
Even though the figures are a preliminary forecast, it seems obvious that Samsung’s 2014 profit will be about 25 trillion won, the weakest in three years. It would be the company’s first yearly profit fall since 2011. Samsung will release an official report in the coming weeks.
Analysts agreed that Samsung is unlikely to experience a deep dive in profits again as seen last year, but it is also difficult for the company to regain the strong growth momentum of the past.
Securing a dominant share in the budget device market ― a soaring mobile segment in Asia ― will be especially crucial for the company’s future growth, they said.
“An increasing number of consumers are turning to cheaper, low-end smartphones. Its new Galaxy E line to be launched next month will be a barometer for the company’s future competitiveness,” said Song Myung-sub, an analyst at Hi Investment and Securities.
Samsung recently unveiled two budget smartphones, the Galaxy E5 and E7, in India. The no-frills handsets are cheaper versions of the company’s low-end Galaxy A series that debuted in December in China and Taiwan.
By Lee Ji-yoon (jylee@heraldcorp.com)