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Samsung Posts High Profit, Sees Better Year Ahead

Posted by: Ihlwan Moon on January 7, 2010

Samsung Electronics on Jan. 7 reported its highest profit in five years and record revenues for 2009, with Chief Executive Choi Gee Sung predicting smooth sailing ahead. In quarterly guidance of its earnings, Samsung said it earned an estimated operating profit of $9.64 billion on sales of $120.1 billion, its biggest ever revenue number. The profit is the highest since 2004 when the company hit a record of $10.38 billion in earnings.

The consensus among electronics analysts is that the South Korean giant, the world’s largest maker of memory chips, liquid-crystal-display panels and TVs, is poised to break records for both revenues and profits this year. That’s because demand for information technology products, particularly that of PCs, is picking up. A double-digit increase in PC demand this year and the growing adoption of Microsoft’s Windows 7 operating systems are expected to keep memory chip prices high. That should be a boon for Samsung, which controls a third of computer memory chips and some 40% of flash chips used to store data for smart phones, music players and other mobile gadgets.

CEO Choi has expressed confidence Samsung will expand its market share for its core businesses. Meeting Korean journalists in Las Vegas on the eve of the annual Consumer Electronics Show, Choi said his optimism is based on just-concluded negotiations with large clients and retailers for the supply of its products. “Negotiation results give us confidence for this year,” Choi was quoted as saying by the local media.

Analysts expect Samsung to be the first to benefit from an economic recovery because the company continued investing in latest production equipment and technologies while rivals cut back in spending during a downturn. That’s particularly so in memory chips as Samsung spent billions in the past two years in the technology of printing thinner circuit lines on wafer disks. Samsung, also the world’s second largest mobile phone maker after Nokia, increased its handset market share to over 20% in 2009 from 16.7% in 2008 while it took the lion’s share in the high-end TV markets for sets costing more than $2,000 apiece.

The biggest challenge facing Samsung is in the area of software and smart phones. While it has steadily increased its global presence in the mobile phone industry in recent years, its share in the smartphone segment remains in low single-digit. “The biggest threat to Samsung is Apple,” says Michael Min, technology expert at fund manager Tempis Capital Management. “Despite all its success in recent years, Samsung has never produced a wow product such as the iPhone.”

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