Samsung Electronics heads into the latter half of 2017 with record quarterly earnings under its belt, hoping to sustain that momentum as Apple prepares to debut the 10th-anniversary iPhone.
Samsung intends to use its well-received Galaxy S8 to extend its lead against its American rival. But it will also lean heavily on its position as the world’s largest maker of memory chips to grow its bottom line.
The company’s ability to produce not only mobile devices but also some of the most vital parts of a phone, including displays, confers a unique advantage over Apple at a time the global market is losing steam.
The company reported its best-ever operating profit on Friday. That result, which includes the first full quarter of sales from the bezel-less S8, underscores how it’s benefiting from higher prices for the memory chips that go into all computing gadgets.
Samsung also happens to be the world’s largest supplier of organic light-emitting diode displays, which may soon become standard.
“Samsung’s dominance in components that matter gives it the upper hand at least through the entire next year,” said Lee Jae-yun, an analyst at Yuanta Securities Korea.
“There is only so much either Apple and Samsung can do right now to make their smartphones stand out, unless technology like foldable displays reshapes the market.”
Outstripping Apple
Samsung may just end up outstripping Apple in profitability in the second quarter. Preliminary operating income rose to 14 trillion won ($12 billion) in the three months ended June, beating the 13 trillion-won average of analysts’ estimates.
Its US rival is projected to post operating income of $10.5 billion in the same quarter – a typically weaker period ahead of the release of new iPhones.
Revenue rose to 60 trillion won, compared with the 58.4 trillion won projected. Its shares finished Friday little changed, taking this year’s gain to about 33 per cent.
While displays and semiconductors have picked up the slack since the Note 7’s recall, the company still gets a significant portion of revenue from smartphones. It hasn’t divulged Galaxy S8 numbers but reviews for the device, which features a bezel-less display and voice-enabled digital assistant, have been favourable.
Meanwhile, LG Electronics estimated its second-quarter operating profit rose 14 per cent from a year ago but fell short of expectations as the mobile division's struggles likely continued.
Losses
LG, the world's number two television maker by sales behind Samsung Electronics, reported a preliminary April-June profit of 664 billion won ($574.49 million), versus a Thomson Reuters StarMine SmartEstimate of 755 billion won from a poll of 18 analysts.
Revenue likely rose 3.9 per cent to 14.6 trillion won, the firm said, also lower than the 15.1 trillion won SmartEstimate.
"It's likely that the mobile division's losses were well over 100 billion won, while profitability for both the television and appliances businesses were a bit weaker than what we had anticipated," Dongbu Securities analyst SR Kwon said.
The firm’s shares extended their losses following the weaker-than-expected guidance and closed down 4.2 per cent, compared with a 0.3 per cent fall for the broader market.
