Samsung posts robust chip growth

Strong sales of Apple’s iPhone 6 and Xiaomi’s low-end smartphones pushed Samsung Electronics, the world’s largest smartphone maker by sales volume, to record its weakest annual earnings in three years.

The Korean tech giant said Thursday it posted an annual revenue of 206.2 trillion won with its operating profit standing at 25 trillion won, down by 10 percent and 11.8 percent respectively, from a year earlier.

The sluggish sales of Samsung’s flagship smartphone, the Galaxy S5 which was released last March, is said to have dampened the profits. But analysts in Seoul forecast that the company would be able to keep its mobile reign given the robust sales of its high-end Galaxy Note 4, released in September.

The Seoul-based tech giant’s IM division in charge of the smartphone business posted 111.8 trillion won in sales and 14.6 trillion won in operating profit, down 19 percent and 10.4 percent on-year, respectively.

Other business units, including display, were also affected by the underperformance of the mobile business.

Analysts said that the decreased sales of Samsung handsets were mainly due to the heated competition with budget smartphone makers from China such as Xiaomi, and the California-based Apple in the high-end handset market.

“Samsung’s smartphones under $200 to be rolled out in the first quarter this year will play an important role in the firm’s efforts to boost the global market share,” said Song Myung-sub, an analyst from HI Investment and Securities.

The semiconductor business of the electronics giant, the main mobile chip supplier of California-based Apple, showed vigorous growth by logging 39.7 trillion won in sales, up 6 percent on-year.

The division’s operating profit at 8.78 trillion won accounted for 35 percent of the total operating profit of the tech giant. 

The memory chip division in particular recorded a 24-percent year-on-year increase in sales at 29.3 trillion won.

Pinning high hopes on its next cash cows ― V-NAND flash memory and 14-nanometer class mobile chips ― Samsung said it would reinforce the chip business and diversify its customer base.

“There is a strong possibility that Samsung will make Exynos application processors for various customers other than itself. And we are already in talks with some potential customers,” said a vice president participating in a conference call held Thursday, promising more investment in the semiconductor sector.

The Seoul-based chipmaker is expected to supply its 14-nanometer mobile application processors for Apple’s next iPhones.

It also said it increased its annual stock dividend to 19,500 won per common share in 2014, up 36 percent from 14,300 won a year earlier.

In the conference call, Robert Yi, senior vice president at Samsung’s investor relations division, said the company, however, had no plan yet to further increase dividends this year.

By Kim Young-won (wone0102@heraldcorp.com)