Samsung warns on smartphones competition

Samsung warns on smartphones competition
By Simon Mundy in Seoul

Samsung Electronics has warned that its smartphone business would be hit this year by growing price competition and slowing demand in developed markets, even as it confirmed record earnings for 2012.

The world's biggest technology group by revenue on Friday confirmed that last year's operating profit rose 88 per cent to Won8.8tn ($8.27bn), with sales growing 18 per cent to Won56tn. That was in line with guidance given earlier this month.

As had been assumed by analysts, growth was driven by the handset business, which accounted for well over half the group's operating profit for the year. Sales in the final quarter rose 58 per cent year-on-year, driven partly by strong uptake of new high-end smartphones including the Galaxy SIII and Galaxy Note II.

Analysts say that despite last year's high-profile legal defeat to Apple in California, Samsung's smartphones are now technically superior to those of its US rival in many respects. The anticipated launch in the first half of 2013 of a new flagship phone to succeed the Galaxy SIII is expected to give its market position a further boost.

But Samsung sounded a note of caution as it unveiled its fourth-quarter earnings statement, which showed an 89 per cent year-on-year rise in operating profit for the last three months of 2012.

"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," it said. "In the first quarter, demand for smartphones in developed countries is expected to decelerate."

Samsung said that emerging markets presented a "silver lining". The company said it would boost sales in lower-income countries by introducing more affordable smartphones, and expected demand for tablets to increase.

However, Samsung's market share in China has been falling as a result of furious price competition from Chinese smartphone manufacturers, whose low-cost devices are expected to pose a growing threat in other emerging markets.

Samsung's other divisions recorded more moderate increases in operating profit, although sales fell in both the consumer electronics and display panel divisions, largely as a result of low demand for televisions. Earnings from semiconductors rose 5 per cent, but the division's sales will be affected by cuts to capital expenditure, Samsung said.

Shares in Samsung fell 1.1 per cent in morning trading on Friday to Won1,437,000.