After record year, Samsung grows cautious

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After record year, Samsung grows cautious

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Although the nation’s largest tech company and the world’s No.1 smartphone manufacturer passed a historic milestone in terms of sales and operating profit, Samsung Electronics’ projection for this year is surprisingly gloomy.

The company said the strong won is a problem along with a weak global economy and heated competition in the IT industry.

In a conference call with investors and analysts yesterday, the tech behemoth reconfirmed its record-breaking performance last year, which was announced through a guidance report earlier this month.

Samsung said its revenue last year was up 18 percent to 201 trillion won ($187 billion), the highest since the company was founded. Operating profit also broke a record reaching 29 trillion won, up 46 percent from the previous year.

It is said that only 13 companies in the world, including Toyota, have been able to break the 200 trillion won sales mark. And no other IT company has yet reached that level.

The impressive performance of the tech company was largely due to strong sales of its mobile devices including the flagship Galaxy S3 smartphone and the Galaxy Note 2 “phablet,” or hybrid phone and tablet computer.

The company said in the last three month of 2012 its revenues rose 18 percent to 56 trillion won while operating profits surged 89 percent to 8.8 trillion won.

The IT and mobile communication unit was the biggest contributor, generating more than 60 percent of the company’s operating profit. The operating profit of that division more than doubled from 2.56 trillion won in 2011 to 5.44 trillion won last year.

The release of iPhone 5 by Apple wasn’t able to curb Samsung’s dominance of the smart devices market.

Including the Galaxy S3, Samsung is estimated to have sold 63 million smartphones in the last three months of last year while Apple is believed to have sold 47.9 million, according to Strategy Analytics. Samsung has also widened its lead against Apple as it is estimated to have shipped 213 million smartphones in 2012, compared to 97 million in 2011. Apple is estimated to have shipped 135 million units last year.

Samsung’s market share in smartphones is now estimated at 30 percent while Apple’s is believed to be 19 percent.

This is a major achievement considering Samsung’s market share was neck-to-neck with Apple - at 19.9 percent and 19 percent respectively - in 2011, according to the report.

However, the future is not all too positive even for the world’s leading smartphone maker.

Samsung did not state yesterday the exact amount of investment it will allocate to facilities, including upgrading production lines and research and development, for this year but it said the amount will be similar to that of last year.

At the beginning of 2012, Samsung announced it would spend 25 trillion won on facility investment, which was a record level. Of the total, 13 trillion won was to be spent on research and development.

The company said it spent 4.4 trillion won in the last three months of 2012, 2 trillion won into semiconductors.

The company emphasized it will make investment decisions flexibly because risks from an uncertain global market remain high.

“The global recession continues while demand for major IT products, including PCs, has been falling,” said Robert Yi, Samsung Electronics IR team executive, on the conference call. “At a time when the business environment is uncertain, we believe it is necessary to make flexible and careful decisions, especially on investment that could bring about huge risk.”

The conservative tone came as a recent strengthening of the Korean won has become a major risk as major economies including Europe, U.S. and Japan try to stimulate their economies through aggressive credit easing.

The company said yesterday it suffered 360 billion won in lost profit in the fourth quarter due to the won’s appreciation. In the third quarter it suffered 570 billion won in such unrealized profits.

Samsung estimated that the won’s appreciation would inflict a similar loss of 300 billion won this year.


By Lee Ho-jeong [ojlee82@joongang.co.kr]

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