Although it had been squeezed by Apple and Chinese budget phone manufacturers, in the beginning of this year, it outmanoeuvred both and emerged on top.
Propelled by a surge in the sale of mobile phones, especially its flagship Galaxy S7, Samsung electronics is poised for its best quarterly profit in more than two years.
The tech giant is set to disclose its estimates for the second quarter on Thursday. Analysts have predicted a jump of 13% in operating profits in comparison to its previous year for the same period.
As per a survey by Thomson Reuters, Samsung’s operating profit is likely to touch $6.8 billion (7.8 trillion won). Its earlier high was in January to March 2014, wherein its profit touched 8.5 trillion won 2014.
According to the survey, the mobile division of the tech giant is likely to be the top earner for the company for a straight second quarter. Earlier Samsung surprised many with its better-than-expected first-quarter earnings which it followed up with issuing a guidance for a further pick up in profits for the subsequent quarter.
“Galaxy S7 sales are better than expected in the first half, and the semiconductor business is also outperforming rivals,” said Lee Jin-woo, fund manager, KTB Asset Management. As per his estimates, Samsung’s quarterly operating profits are likely to hold strong throughout 2016-2017 with its profits ranging from 7 trillion won and 8 trillion won in each quarter.
At the beginning of this year, Samsung’s smartphone business had come under increased pressure from Apple, at the top, and from Chinese rivals from the budget segment. The Galaxy S7 has been its saving act of grace since it acted as a catalyst for its earnings to rebound, which put its phone business on track and helped it clock its first annual profit in 3 years.
According to analysts, Samsung shipped nearly 16 million Galaxy S7s in the first quarter, with its curved-screen outselling its flat counterpart. Since the former had higher margins, it boosted its profitability.
Analysts also point to the fact that lack-lustre sales from competitors have enabled it to strategically reduce its marketing expenses.
“While operating profit margins for the mobile phone business will decline in the third and fourth quarters as the Galaxy S7 effect fades, operating profit will continue to grow on an annual basis,” said Korea Investment & Securities in a report.
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