Samsung scores record Q2 profit on chips, LCDs

IDG News Service - Samsung Electronics on Friday reported a record high operating profit and net profit for the second quarter, driven by strong sales of memory chips and LCDs, but it warned that stiff competition in consumer electronics means it may not be able to maintain profitability at current levels.

The company is considered a technology industry bellwether because it is the world's largest producer of several products, including flat-screen TVs, DRAM, NAND flash memory chips and LCD screens, as well as the second-biggest mobile phone vendor. Its strong performance in the second quarter, which ended June 30, follows a string of glowing reports from technology industry leaders, from Apple to Intel.

Samsung said its operating profit reached 5.01 trillion Korean won (US$4.22 billion) in the second quarter, while sales rose 17 percent year-on-year to 37.89 trillion won. The operating profit figure beat Samsung's previous high of 4.41 trillion won in the first quarter of this year. Net profit at the company rose 83 percent to 4.28 trillion won.

"In the second quarter, our component businesses performed very strongly, yet it was a more challenging quarter for our [electronics] businesses,” said Robert Yi, a vice president at Samsung. While chips and LCDs did well for the company, competition in mobile phones, flat panel TVs and other consumer electronics hurt.

"With intensified competition throughout the digital media and mobile industries going forward, it may become a challenge to maintain current profitability levels," he said..

The company sold 63.8 million mobile phones during the quarter, up 22 percent from last year, but average selling prices dropped due to the increased competition, Samsung said in a statement. The company's mobile phone shipments also declined slightly compared to the first quarter due to weaker phone shipments to Europe, a sign sovereign debt concerns on the continent spread to consumers.

Looking ahead, Samsung sees continued challenges in its mobile phone unit due to intensifying competition, said Hwan Kim, vice president of the company's mobile communications business, during a conference call.

Samsung anticipates that smartphones will continue to dominate the handset landscape in the second half of this year due to the release of new designs, "especially Android phones", it said in a statement. Samsung plans to launch more smartphones, including a range of mid-end smartphones, in the third quarter to increase its share of the lucrative market.

The company expects revenue at its network equipment business to increase due to higher sales of mobile WiMax equipment in Asia.

The world's largest TV maker struck a positive note for flat panel TVs, including new products.

Samsung said it has sold 500,000 3D-capable TVs since launching its lineup in March. The company shipped 9.02 million flat TVs in the second quarter, noting strong growth in developing markets and increased sales of its LED TVs.