Samsung Boasts Record Profit, Warns Of CE Impact

By Joseph Palenchar -- TWICE, 7/30/2010

Seoul, South Korea - Samsung posted an 88 percent gain in operating profit to a record 5.01 trillion won, or $4.23 billon, in the second quarter on a 17 percent sales gain to 37.89 trillion won, or $31.96 billion.

The company attributed the gains to "significant improvements" in its semiconductor business, reflecting an industrywide recovery, and in its LCD-panel business, but the company pointed out that the quarter "was a more challenging quarter" for the consumer electronics, cellular handset, and telecom networks businesses. "With intensified competition throughout the digital media and mobile industries going forward," warned VP Robert Yi, "it may become a challenge to maintain current profitability levels." Digital media includes TVs and digital appliances. The price competition "will put downward pressure on profit margins in the third quarter," a company statement added.

Second-quarter operating profit exceeded the previous record of 4.41 trillion won set in the first quarter. The quarter's net income hit 4.28 trillion won, or $3.61 billion.

The company's telecom business -- consisting of handsets and telecom networks -- posted an operating profit of 630 billion won on revenue of 8.78 trillion won. Handset sales grew 22 percent year-over-year to 63.8 million units, but average selling prices (ASPs) declined slightly, the company said. Touchscreen handsets accounted for 30 percent of unit sales during the quarter, up from a year-ago 15 percent.

In the third quarter, Samsung said it would increase its smartphone share through the launch of flagship devices such as the Galaxy S and Wave, but the company also plans to launch a range of mid-end smartphones.

In the digital media business, sales rose 20 percent to 14.54 trillion won, but operating profit fell 69 percent to 360 billion won from 1.16 trillion won. Flat-panel TV shipments surged 43 percent to 9.02 million units because of strong growth in developing markets, where increased sales of large-sized, LED and 3D-capable TVs drove operating profit, the company said. Samsung claimed a "strong lead" in the 3D TV market by selling more than 500,000 units following the launch of its 3D lineup in March.
  In digital appliances, sales rose 23 percent because of demand in developed markets, Russia and some emerging markets, the company said.

In the third quarter, the company forecasts flat-panel TV demand to rise 20 percent year-over-year on rising sales of high-end LED models, which are expected to account for 30 percent of total LCD TV sales during the fourth quarter. Samsung said it will continue to expand its LED TV lineup and continue its 3D focus.

In semiconductors, operating profit hit 2.94 trillion won on sales of 9.53 trillion won, and the LCD-panel business generated an operating profit of 880 billion won on 7.76 trillion won in sales.

LCD-panel sales rose 15 percent to 20 percent, with ASPs for TV panels rising 3 percent. Pricing was flat in notebook panels and PC monitor panels.

Strong seasonal demand for panels in the third quarter will be offset by increased industry supplies, the company said.