Profits down at Samsung despite soaring smartphone sales

29 Jul 2011

Korean electronics giant Samsung’s operating profits have plunged 18pc to 3.75trn won (US$3.6bn) from 5.01trn won last year. Despite soaring smartphone sales, revenues from semiconductors and display divisions were affected by the fragile global economy.

The consumer electronics company said today that sales of its Galaxy S II smartphone and other mobile devices saw sales at its Telecommunications division rise 43pc. Improved demand for flat-panel TVs also boosted sales in the company’s Digital Media & Appliances division.

However, operating profit declined year-on-year because of weakened consumer demand reducing margins in the Semiconductor and Display Panel businesses.

“Despite the challenging business environment and global economic uncertainties, we continued year-on-year revenue growth in the second quarter driven by mobile device sales, particularly the success of our smartphones,” said Robert Yi, vice-president and head of Samsung Electronics’ Investor Relations Team.

“Heading into the third quarter – which typically sees increased consumer demand for electronics – we expect competition to remain tight, and will continue to enhance our cost competitiveness and technology leadership in the components businesses,” Yi added.

Capital expenditure for the second quarter was 5.6trn won, bringing the total investment for the first six months of 2011 to 11.2trn won. Samsung said the annual projected capex of 23trn won remained unchanged, however a shift in allocation to increase semiconductor and reduce LCD investment was possible.

Photo: The Samsung Galaxy S II smartphone

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years