Samsung rings $ 8.5 b profit in April-June qtr; to invest $ 1 b
Monday, 29 July 2013 00:00
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SEOUL (Reuters): Samsung Electronics Co. Ltd. announced a $ 1 billion increase in investment on Friday, hoping a strong recovery in semiconductors will make up for weakening smartphone growth as it faces mounting pressure to produce eye-catching new gadgets.
The high-end smartphone market, which Samsung dominates along with Apple Inc., is slowing and the South Korean giant is struggling to convince investors it can crack the rapidly growing low-end segment, where its rivals include China’s Huawei Technologies Co Ltd and ZTE Corp.
Samsung on Friday reported a 47.5% rise in April-June operating profit of a record 9.53 trillion won ($ 8.54 billion), in line with its estimate. But profits at its mobile division, which generates two thirds of its total earnings, slipped 3.5% from the previous quarter even with the launch of its flagship Galaxy S4 in late April, sparking concerns its mobile growth momentum may have stalled as competition intensifies.
Executives offered little to give investors hope that a new market-shifting breakthrough in high-end smartphone technology is around the corner, fuelling uncertainty over a segment which appears to have peaked in the first quarter after driving a series of record profits for Samsung in recent years.
Mobile division profit was still up 52% from a year ago but even that fell short of expectations, as slower sales of old models like the S3 and the marketing bill for the S4 took their toll.
Samsung warned that global smartphone sales growth could weaken further in the third quarter, and said it expected stiffer competition due to new product launches. Apple is expected to release the iPhone 5S and a low-end iPhone later this year.
“As we go into a typically strong season for the IT industry, we expect earnings to continue to increase,” Samsung said in its earnings statement. “However, we cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphones and other set products.” Samsung forecast stronger earnings in the second half thanks in part to its component business, which was staging a solid recovery on the back of soaring prices for semiconductors used in personal computers and mobile devices. Capital spending in 2013 would increase by more than 1 trillion won to 24 trillion won, and could rise further depending on market conditions. More than 80% of that expenditure would be devoted to chips and flat panels such as liquid crystal displays and organic light emitting diode technology, seen as the next big thing in television.
The world’s biggest maker of memory chips and televisions said profits from its chip business rose 71% to 1.76 trillion won in the second quarter.
