Samsung Electronics Co Ltd (KRX:005930) has managed to pull off an unbelievable comeback over the last year, as they are now set to overtake Apple Inc. (NASDAQ:AAPL) as the most profitable smartphone company in Q2 2017. According to the earnings guidance report for Q2 2017 released today, Samsung is expecting 14 trillion Korean won or $12.1 billion operating profit in Q2 2017. The exact figure would be out by the end of this month when final figures of the quarterly performance of both companies would be out.
The profit comes on the back of $52 billion in revenue during the same time period. This represents a massive 72% YoY growth over Q2 2016 when Samsung posted 8.14 trillion Korean won ($7 billion) in profits.
This is incredible for a company that was rocked by one of the biggest smartphone setbacks in recent memory. The Note 7 was an unmitigated disaster for Samsung, resulting in a poor bottom line and huge losses. It even allowed its arch-rival Apple to steal their crown as World’s Largest Smartphone Maker.
However, in under a year, Samsung has pulled off a highly unlikely comeback. First, they managed to steal back the title of “World’s Largest Smartphone Maker” from Apple in Q1 of this year. Now they are expecting to beat out Apple in terms of quarterly profits for the first time ever since the smartphone revolution. Apple’s profit during the same period is expected to be around $10.5 billion.
So how has Samsung managed this impressive feat in such a short duration? There are few key reasons:-
- The Success Of The Galaxy S8 – After the disastrous launch of the Note 7, Samsung needed the S8 to be smash hit. That is exactly what has happened, with the Galaxy S8 garnering plenty of critical acclaim and popularity. This has surely helped in driving revenue and profits.
- Booming Chip Sales – Despite the great response to the Galaxy S8, it was Samsung’s chip making a business that is bringing in the majority of the profits. Analysts expect $15.13 billion in revenue from Samsung’s semiconductor business in this quarter alone, which would put it ahead of even Intel as the world’s largest semiconductor maker. Samsung also intends to further consolidate their lead in this market, announcing plans to invest $18 billion in South Korea in its chip business over the next few years.
- OLED Displays – Another major factor behind Samsung’s record profits is their dominance over the OLED market. This year, many smartphone makers are planning to switch to superior OLED display technology. Currently, Samsung controls almost 95% of the OLED display market. This unique position sets up Samsung brilliantly for the future, as most major smartphone makers will now have to source their displays from them. Even arch rivals Apple is dependent on them for displays and NAND chips. This means that if the iPhone 8 is successful, it could push Samsung’s revenue and profits even higher!
