Samsung Electronics primed investors for a 73 per cent year-on-year leap in
fourth-quarter operating profit on sales up 12 per cent (admittedly buoyed
by a one-off gain from the sale of a hardware unit). That follows a strong
third quarter. The question is how long the strength of its business can be
sustained.
Key to Samsung’s current success is its ability to adapt quickly and its
presence in Asia’s growth markets. As chips and flatscreen segments hit hard
times, mobile phones now lead the company’s growth. They accounted for 36
per cent of total sales in the third quarter, from 27 per cent a year ago.
Thanks to its Galaxy smartphone, Samsung’s phone division is also the most
profitable: its operating margins of 16.9 per cent surpassed those in its
semiconductor unit for the first time. Asia, meanwhile, accounts for more
than half of the group’s sales. Samsung smartphone handset shipments in
China, for example, surged by more than 124 per cent in 2011, Nomura
estimates. The group has about a quarter of the Chinese smartphone market.
Cruel
That is all very well, but consumers can be cruel, especially in Asia. A lack
of fixed-term contracts and the urge to have the latest upgrade mean that a
smartphone can go from leader to loser in a matter of months. In China,
Samsung’s GT smartphone model was the bestseller in November on the
country’s dominant eCommerce site, Taobao. It is now fifth, some way behind
Apple’s 4S.
The travails of Nokia and HTCshow the risks for mobile phone pure plays. And
as phone makers tie up with software providers – Google’s Motorola deal
being an example – Samsung looks exposed without a partner, and too reliant
on handsets alone. It cannot afford to lose its ability to adapt.
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