Samsung posts record profits as competition from China increases

By Danny Palmer
25 Jan 2013 View Comments

Samsung posted a record net profit of $6.6bn (£4.2bn) in the final quarter of 2012, the firm announced in its Q4 earnings release, but warned of more difficult times to come.

It comes one day after rival smartphone producer Apple also announced record profits driven by the iPhone and iPad Mini.

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Samsung's net profits for Q4 jumped 76 per cent on the previous year, with sales of smartphones, most notably that of the Samsung Galaxy S III, driving success.

While Samsung hasn't released figures about mobile device sales, research firm Strategy Analytics estimate the South Korean company sold 63 million smartphones during the fourth quarter of 2012 and holds a 30 per cent share of the market.

However, Samsung believes extra competition in the mobile device market is likely to impact on future profits as soon as the first quarter of this year.

"The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition compounded by a slew of new products," the firm said in a statement.

"In the first quarter, demand for smartphones in developed countries is expected to decelerate, while their emerging counterparts will see their markets escalate with the introduction of more affordable smartphones."

Increased competition looks set to come from Chinese telecoms companies Huawei and ZTE, which according to an IDC report are now both among the world's top five smartphone vendors. Huawei is now ranked third with five per cent of the market, while ZTE sits in fifth place with just over four per cent.

"The fact that Huawei and ZTE now find themselves among the top five smartphone vendors marks a significant shift for the global market," said Ramon Llamas, research manager for IDC's mobile phone team.

"Both companies have grown volumes by focusing on the mass market, but in recent quarters they have turned their attention toward higher-end devices. In addition, both companies have pushed the envelope in terms of industrial design with larger displays and smaller form factors, as well as innovative applications and experiences."

Apple and Samsung still dominate with over 50 per cent of the market between them, with the rise of the Chinese companies mainly coming at the expense of RIM and HTC, both of which have slipped out of the top five. Nokia dropped out of the top five last year.

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