Last updated: January 28, 2011 10:25 am

Mobile devices drive record Samsung profit

 
Samsung smartphone©Reuters

Samsung had the biggest booth at the Consumer Electronics Show in Las Vegas in January

Samsung Electronics, the world’s second-biggest maker of mobile phones by volume, reported a record net profit last year as it gained ground in the fast-growing market for hand-held mobile devices.

Analysts expect the South Korean company to further close the gap with Apple in the smartphone and tablet PC race, with its new Galaxy smartphones projected to mount a serious challenge to the iPhone, but warn the stronger won is likely to eat into its fat margins this year.

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Results on Friday showed that operating profit from Samsung’s telecoms division, which accounted for nearly half its total profits, surged 38 per cent to Won1,440bn ($1.3bn) in the October-December period, as its Galaxy S smartphones and the Galaxy Tab tablet PC gained in popularity. Samsung shipped a record 280m units of mobile phones in 2010, up 23 per cent from a year earlier.

“Samsung’s Galaxy lines are the only major competitors to Apple’s iPhone and iPad at the moment, while the other companies like Nokia, LG Electronics and Motorola are still struggling to come up with a competitive device to take on Apple,” said Park Kang-ho, an analyst at Daishin Securities.

Samsung has sold about 10m units of the Galaxy S since its June launch of the smartphone based on Google’s Android operating system, and about 2m units of the Galaxy Tab tablet PC in the past three months. It is fast catching up with Apple, which sold more than 7m iPads and 16.2m iPhones last quarter alone.

But analysts predict Samsung will face stiffer competition this year, as other rivals begin introducing their own offerings in the high-margin mobile device market.

“With global economic uncertainties remaining, we continue to expect some tough business environments in 2011, such as intensifying price competition for set products and price declines for major component products,” Robert Yi, Samsung’s chief of investor relations, said in a conference call.

The global smartphone market is forecast to grow more than 40 per cent this year to over 400m units, while the tablet PC market is forecast to more than double to 55m units.

Samsung reported a 12.6 per cent rise in fourth-quarter net profit to Won3,420bn, as robust sales of mobile phones offset lower prices of other major products such as flat-panel TVs and memory chips.

Full-year net profit was a record Won16,150bn compared with Won9,800bn in 2009.

This week, Nokia, the world’s largest mobile phone maker, gave a disappointing outlook for the first quarter after reporting a 21 per cent drop in fourth-quarter net profit. It has been rapidly losing ground to Apple and Samsung in the smartphone market, with its market share falling to 31 per cent from 38 per cent in the third quarter, compared with Apple’s 17.4 per cent and Samsung’s 9.3 per cent.

Samsung’s shares rose 1.6 per cent on Friday to close at a record high in Seoul.

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