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Samsung posts record Q2 profit, smartphone fears linger
Aggregated Source: Shanghai Daily: Business

Samsung Electronics, the world's largest technology firm by revenue, on Friday posted another record quarterly net profit, but weakening earnings momentum has fueled fears over flagging demand for high-end smartphones.

The South Korean giant said its April-June net profit surged 49.7 percent year on year to 7.77 trillion won (US$6.96 billion) thanks to robust shipments of its flagship Galaxy S smartphones and higher chip prices.

Second-quarter operating profit surged 47.5 percent to 9.53 trillion won in the same period as sales grew 20.7 percent to 57.46 trillion won.

The figures were in line with the firm's forecast at the start of the month, although they were well short of expectations, which had been for an operating profit of 10 trillion won.

"Entering into a typically strong season for the IT industry, we expect earnings to continue to increase," said Robert Yi, senior vice president and head of investor relations.

But he warned: "We cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products."

However, despite the record earnings Samsung's share price has been falling - wiping about US$30 billion off the firm's value - since late April when the flagship S4 hit stores, as sales have not been as high as hoped.

That is despite the company spending billions of dollars on a global marketing campaign, squeezing margins, after launching the latest gadget at a lavish New York event in late March.

"Expectations had been too high for high-end smartphone sales. Many investors now think the Galaxy S4 has not been selling so well," said Oh Young-Bo, of Hanmag Securities.

He added that investors are growing concerned as Samsung relies heavily on sales of smartphones to drive growth.

With an expected drop-off in demand for high-end phones, brokerages began cutting their forecasts for earnings and sales in June.

While Samsung did not reveal smartphone shipments it is thought to have sold about 75 million in the past quarter, including about 20 million Galaxy S4 phones.

But while that helped Samsung maintain its status as the world's largest handset maker, the figure is only slightly up from the estimated 70 million shifted in the previous three months, suggesting a slowdown in growth momentum.

Samsung's record earnings come after US giant Apple unveiled its fiscal third-quarter results, which showed net profit had plunged 22 percent year on year.

But while sales of Apple's iPhone beat expectations, there are still fears for the high-end smartphone market as cheaper Android devices from China and emerging markets become more attractive options.

Samsung, Nokia and HTC are launching more affordable devices to diversify their product line-ups, although analysts have warned that such a move could hit their profit margins in the longer term.

Hanmag Securities' Oh forecast Samsung's operating profit would rise to 10.5 trillion won in the third quarter, although he said this would mainly be thanks to sales of displays, semiconductors, and tablet computers.

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