Samsung set to gain $9.5b from strong S7 sales

SELLING POINTS: Samsung's projected 2nd-quarter operating profit is its biggest since 2014's 1st quarter, aided by good sales and cost cuts.


    Jul 08, 2016

    Samsung set to gain $9.5b from strong S7 sales


    SAMSUNG Electronics yesterday flagged its biggest operating profit in more than two years, boosted by cost-cutting efforts and solid sales of its latest flagship smartphone.

    The South Korean electronics giant - also the world's top handset-maker - predicted an operating profit of 8.1 trillion won (S$9.5 billion) in April to June, up 17 per cent from 6.9 trillion won a year ago.

    It is the company's biggest operating profit since the first quarter of 2014.

    "Samsung's mobile unit is believed to have performed well thanks to robust sales of Galaxy S7s as well as an overhaul of its low- and mid-end handset line-up," said Peter Lee, analyst at NH Investment & Securities.

    He estimated that in the second quarter, the firm had sold more than 16 million units of the S7. It was introduced in March ahead of new launches by rivals, including Apple.

    Samsung's mobile business accounts for the lion's share of overall profit, which has been squeezed by competition from Apple's iPhone and lower-end devices from Chinese rivals like Huawei.

    Samsung has bolstered its mid- to low-end smartphone line-ups in a bid to expand in emerging markets. These are growing faster than the largely saturated high-end markets.

    The firm's aggressive cost-cutting in marketing played a key role in the strong profit forecast, Greg Roh of HMC Investment said.

    But with "Apple releasing new products in the latter half of the year... I think (Samsung's) earnings may drop in the second half".

    Still, the firm's semiconductor business, which produces memory chips for Samsung gadgets and clients including Apple, is likely to help offset a slump in the mobile business, Mr Lee said.

    The semiconductor unit has helped buttress Samsung's profit margins, with its operating profit largely outpacing the mobile business' since late 2014.

    The world's No. 2 chip-maker has dominated production of faster, larger-capacity chips using a technology called 3D Nand.