The 12% increase in Samsung Q1 operating profit came days after Apple reported its first decline in quarter revenue. With $5.48 billion in net profit, Samsung beat estimates thanks to the strong initial sales of the Galaxy S7 smartphone.
After the disappointing result with $8 billion loss in market value in 2015, this quarter Samsung decided to start S7 sales about a month earlier than the S6 to take advantage of the quiet smartphone market when Apple hasn’t launched any new products yet. This smart move led to a shipment record of 9.5 million, more than the estimates of 7 million. Samsung expects further solid performance in Q2 led by mobile and semiconductor business.
However, the analysts doubt the ongoing strong sales performance in the next quarter since the market will be crowded with more phone models. Yoo Eui-hyung, an analyst with Dongbu Securities in Seoul, said that Samsung’s better-than-estimate profit was also due to the weak won effect and the cut in marketing costs, which are not sustainable factors.
Profit for smartphone increased 42%, which was the highest level since Q2 in FY2014. In other product divisions, operating profit for chip division fell 6% because of price declines and low demand. Consumer electronics segment also suffered from falling demand.
Releasing good earnings result after Apple’s historic decline after 13 years, Samsung has won this round in terms of sales volume. However, in China’s market where Apple sales declined, the two companies faced fierce competition from other low-priced vendors such as Xiaomi , Huawei and Oppo according to Rosenblatt Securities’s Jun Zhang.
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