Samsung Electronics said Thursday that its second-quarter operating income jumped 17 percent over a year earlier to the highest quarterly profit in more than two years, as strong sales of its Galaxy smartphones drove profit growth in the mobile business.
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In its earnings preview, the South Korean company put its operating income at 8.1 trillion won ($7 billion), compared with 6.9 trillion won a year earlier. Sales likely rose three percent on-year to over 43 billion dollars. The numbers offered a preliminary glimpse of final earnings results set for release later this month.
The high-end smartphone market is expected to grow 19 per cent in 2016 from 15 per cent in the previous year as more and more customers are upgrading to premium devices from top brands like Samsung, Apple and OnePlus, another report said recently.
The vast lineup of low- to mid-priced smartphones at Samsung was slimmed down to just the Galaxy A, J and E, resulting in greater profitability. “Especially, they seem to have higher hopes on foldable smartphones”.
While Samsung didn’t go into details in its guidance announcement about the factors behind the surge in profits, analysts told Reuters this week that huge sales of Samsung’s Galaxy S7 smartphone have been behind the growth. “Apple might not be able to use OLED for all new iPhone models in 2017 since Samsung might not even have enough capacity to supply Apple”. The tricky part will be maintaining demand for the Galaxy S7 line into the second half of the year.
Young visitors try out Samsung gadgets at the electronics maker’s headquarters in Seocho, Seoul on Thursday.
Samsung is the world’s No. 2 chipmaker and has dominated production of faster, larger-capacity chips using a technology called 3D NAND.
The firm’s aggressive cost-cutting in marketing played a key role in the strong profit forecast, Greg Roh of HMC Investment said, warning of more competition from Apple later this year.
“For the medium term I think 4 trillion won (quarterly mobile) profit is the new normal”, Nomura analyst C.W. Chung said.
Samsung is projecting sales during the second quarter will have an increase of 3.1% when reported later this month.
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At the same time, Apple’s iPhone 6 series proved to be wildly successful, adding to Samsung’s woes.
