Samsung Electronics said on Friday its net profit soared 75.6 percent to a record 7.04 trillion won ($6.6 billion) in the fourth quarter of 2012, driven by strong smartphone and memory chip sales.
The world's largest technology firm by revenue and top smartphone maker also saw a record operating profit in October-December of 8.84 trillion won, up 89.7 percent from a year earlier.
For all of 2012, Samsung logged a net profit of 23.8 trillion won, with revenue and operating income reaching 201.1 trillion won and 29.05 trillion won respectively.
"Despite uncertainties in Europe and concerns over the U.S. fiscal cliff creating a difficult business environment, we did our best this quarter to achieve strong earnings based on a strategic focus on differentiated and high value-added products as well as our technological competitiveness," said Robert Yi, Senior Vice President and Head of Investor Relations.
Highlighting the quarterly performance, Samsung's Mobile Communications generated quarterly revenues of 27.23 trillion won, a 4-percent increase compared with the previous quarter. The growth was mainly driven by solid sales of Samsung's GALAXY S IIl and GALAXY Note ll. Operating profit for IT & Mobile Communications, which encompasses four business units including Mobile Communications, was 5.44 trillion won on revenues of 31.32 trillion won. While Samsung does not provide figures for quarterly smartphone shipments, analysts estimate the company sold 63 million smartphones on total handset sales of 110.5 million units.
At the world's biggest electronics show in Las Vegas this month, Samsung unveiled a prototype phone with a flexible display that can be folded and the Exynos 5 Octa microchip with eight processing cores, creating a buzz that these may be used in the next Galaxy range.
"The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition compounded by a slew of new products," Samsung said. "In the first quarter, demand for smartphones in developed countries is expected to decelerate, while their emerging counterparts will see their markets escalate with the introduction of more affordable smartphones and a bigger appetite for tablet PCs throughout the year."
Samsung's IT & Mobile Communications - comprised of Mobile Communications, Telecommunication Systems, Digital Imaging and Media Solution Center businesses - posted operating profits of 5.44 trillion won on 31.32 trillion won in revenue for the period. Out of the total IM earnings, the handset-making unit claimed 27.23 trillion won in revenue in the October-December quarter.
Samsung's Display Panel Business recorded an operating profit of 1.11 trillion won on revenue of 7.75 trillion won in the fourth quarter. This represented a 5-percent decline in profits compared with the previous quarter but was up from the corresponding quarter of 2011.
Despite slower-than-expected economic recovery in developed markets, panel demand in China and emerging economies remained favorable in the quarter. This was led by solid sales of TV and tablet panels which offset the slowdown in notebook and monitor panel demand.
Samsung was able to secure stable growth for the quarter with an improved product mix and strengthened sales of high-end panels. Sales of LED and narrow bezel panels for premium TVs continued to grow, although the company's TV panel sales dropped in the mid single-digit percentage range from the same period last year. However, increased sales of tablet panels as well as OLED panels for premium smartphones contributed to steady growth.
Looking ahead to 2013, the company expects the market for large-size TV panels, those over 60 inches in size, to grow. Strong sales of tablet panels are also forecast to continue throughout the year. For the first quarter, however, panel demand is expected to be adversely affected by off-peak seasonality before recovering in March with new TV and tablet product launches by manufactures.
On the components business side, demand for PC DRAM remained weak but growth of high value-added products such as server and mobile DRAM was constant due to increased sales of mobile devices.
Samsung's Semiconductor Businesses - including Memory and System LSI - posted consolidated 9.59 trillion won in revenue, a 10-percent hike from a quarter earlier. The Memory chip unit accounted for 5.33 trillion won in earnings and with the logic chip unit yielded 1.42 trillion won in operating profits, up 39 percent on-quarter.
The company's Semiconductor Business sustained profitability in the quarter, amid weak market demand, thanks to a mix of high-margin products such as servers and Solid State Drives (SSDs) coupled with 20-nanometer class NAND flash chips. A competitive edge in mobile application processors for smartphones and tablet PCs also contributed to the bottom line.
Looking ahead, Samsung expects demand for memory chips to be stifled in the first quarter, due to the seasonably weak demand for PCs and mobile devices. However, for the remainder of 2013, high value-added DRAM for mobile devices and servers will sustain profitability. The company expects demand for logic products and NAND solutions including SSDs to remain strong throughout the year, as the industry puts greater emphasis on devices with higher capacity, greater processing power and mobility.
Samsung's Consumer Electronics Division - encompassing the Visual Display and Digital Appliances businesses - posted revenue of 13.95 trillion won for the quarter, up 20 percent quarter-on-quarter. The operating profit of 740 billion won amounted to an increase of 87 percent on the previous quarter and an increase on-year.
Heading into 2013, sales will be led by emerging economies and the LED TV segment, which will expand its proportion of total TV sales into the mid-80 percent range. In the first quarter, Samsung expects off-peak seasonality to dampen on-quarter growth, although demand will be up in comparison with the previous year.
As for this year's capital expenditure, Samsung's investments are expected to be similar to that of 2012's. The weakening global economic recovery and looming market uncertainties are anticipated to weigh on plans for investment and performance this year, but despite global economic jitters, Samsung said it would "respond to the market's ebb and flow with a capex plan that is flexible in manner."
"Heading into this year, we are expecting a slow recovery in the component business due to reduced capital expenditures, while competition in the set business will intensify further as demand slows and the mid- to low-end market expands," he added. Mr. Yi also expressed caution over the continued strength of the Korean won in 2013.