October 28, 2011 10:42 am

Samsung beats Apple in mobile stakes

Samsung Electronics has overtaken Apple to become the world’s largest seller of smartphones as shipments rose 40 per cent in the third quarter, shaking off legal wrangling between the two companies over technology patents.

Only a year ago the South Korean company was a minor player in the booming smartphone market, but it has quadrupled smartphone shipments over the past year by turning to Google’s Android software for its Galaxy products.

The company has fast caught up with rivals on the back of its hardware strength and wide distribution network, while rival LG Electronics continues to struggle with a lack of hit models, this week reporting a bigger than expected quarterly loss.

Samsung did not give exact shipment figures for its smartphones in an effort to avoid further damage to its relationship with Apple, which is its main competitor but also its biggest customer.

But UK-based Strategy Analytics, a market research firm that follows the smartphone market closely, on Friday said Samsung shipped 27.8m smartphones in the last quarter, taking 23.8 per cent of the market, compared with Apple’s 17.1m shipments and 14.6 per cent market share.

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“Samsung’s rise has been driven by a blend of elegant hardware designs, popular Android services, memorable sub-brands and extensive global distribution,” said Strategy Analytics.

Apple had no immediate comment about the slip in its share of the market, where it took the top spot only a quarter ago. But iPhone sales declined in the third quarter largely because consumers were waiting for the release of the next model, the iPhone 4S. When that phone went on sale, after the third quarter ended, it broke Apple’s sales record with 4m orders in the first three days.

Analysts expect Samsung can sustain its momentum through the fourth quarter, even with Apple’s iPhone 4S enjoying strong sales and Nokia moving to shore up its once dominant market position with the launch of its first smartphones based on Microsoft’s Windows software.

Operating profit for Samsung’s handset business more than doubled to a record Won2,520bn ($2.3bn) in the third quarter, accounting for 60 per cent of the company’s total operating profit and surpassing that of its bread-and-butter chip business for the first time. Its total operating profit of Won4,250bn was in line with estimates it gave earlier in the month.

Samsung’s handset profit margin stood at 16.9 per cent. The company is the world’s second most profitable handset maker after Apple, whose operating margin was 30.8 per cent in the third quarter.

Samsung was upbeat about its outlook on Friday, predicting continued profitability thanks to a varied product line-up. “Looking ahead into the fourth quarter – when industry demand is traditionally at its peak – Samsung expects sales of mobile devices to remain strong,” the company said.

Since April Samsung and Apple have been locked in a widening conflict over patents in nine countries including the US, South Korea, Japan and the UK. Both have sought sales bans on the other’s devices, which Apple has been granted in several countries.

The legal battle “seems to have had little effect on Samsung’s smartphone sales and will continue not to as the company launches revised products to get around the sales ban in some countries,” said Park Kang-ho at Daishin Securities.

But Mr Park cautioned that Samsung still faces challenges in cementing its position in the fast-growing tablet market as well as boosting the competitiveness of its homegrown operating system Bada.

Samsung said net profit was Won3,440bn in the third quarter, down 23 per cent from a year earlier, as its display business suffered a third consecutive quarter of losses. Its semiconductor business held up relatively well, posting a Won1,590bn profit, making Samsung the world’s only profitable major D-Ram producer.

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