A slowdown at the high end of the smartphone market did not stop Samsung from raking in record profits once again during the third quarter. While sales of the Korean giant’s high-end Galaxy smartphones leveled off, mass-market smartphones did very well, as did the memory chips that Samsung supplies to makers of competing mobile devices.
During the third quarter, Samsung posted net income of $7.6 billion, up 25% from the year-ago quater. Operating profit was $9.6 billion on sales of $55 billion. Of that $55 billion, 62% came from Samsung’s mobile division, which includes smartphones and tablets as well as wireless infrastructure and networking equipment. Samsung said that its mobile unit saw big increases in sales of tablets, mass-market smartphones, and LTE network equipment.
Chip sales accounted for 16% of Samsung’s revenue during the third quarter. Sales for this unit were up 11.6% from the year-ago quarter, and operating profit more than doubled as Samsung increased sales of higher-priced processors and migrated much of its production to a 20-nanometer process, increasing the number of chips that can be cut from a single piece of silicon. The company said chip sales were up in all of its target markets: mobile, game consoles, servers, and even in the sluggish personal computer market. Third quarter is traditionally strong for chip sales into the PC market.
Tough holiday season ahead?
Samsung cautioned investors not to expect stellar growth from its high-end smartphones during the holiday selling season. The company said competition will be significant, as will marketing expenses. The Galaxy S4 and the Note III are not as new as the iPhone 5s, and the Galaxy S5 is not expected to launch until next year. Nokia/Microsoft will market the new Windows smartphones very aggressively this season, and other high-end Android phones will also give the Galaxy S4 a run for its money.
In time, however, Samsung may drive some of its Android competition out of the market. HTC has been losing money and LG yesterday reported lower-than-expected earnings due to weaker smartphone sales. LG is the number two Android smartphone maker after Samsung, according to IDC, but during the second quarter Samsung outsold LG by 6-to-1. Third quarter smartphone sales results are not expected until next month.
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