13 ms·

Samsung posts $7.4 billion profit as handsets mask weak chip sales

59 points by ari_elle 14y ago

loceng 14y ago
Wow.. Good job.
stephenjudkins 14y ago
By comparison, Apple just posted $8.22 billion of net income. [http://www.nytimes.com/2012/10/26/technology/apple-profits-rise-24-on-iphone-5-sales.html http://www.nytimes.com/2012/10/26/technology/apple-profits-r...]. Approximately $5.1B of Samsung's profits came from their phones; this is despite Samsung being an extremely diversified company. I cannot find what proportion of Apple's profits come from sales of iPhone and iPads; they do, however, make up a majority of their revenue.
- ari_elle 14y ago
  As you stated, "I cannot find what proportion of Apple's profits come from sales of iPhone and iPads; they do [...] make up a majority of their revenue." it's imo very safe to assume that. They sold an astonishing 26.9 million iPhones in Q3, 58 percent growth compared 2011. Also 14.0 million iPads (Q3), 26 percent growth. With a 4.9 million Macs sold (only 1 percent unit increase) and a 19 percent decline with Ipods, i guess it's safe to assume that most of their revenue (especially additional revenue compared to last Q3 earnings) comes from Iphones/Ipads. All numbers from official press release: http://www.apple.com/pr/library/2012/10/25Apple-Reports-Fourth-Quarter-Results.html http://www.apple.com/pr/library/2012/10/25Apple-Reports-Four... Anyway: Good job Samsung :)
  - clarky07 14y ago
    they make roughly half their profit from iPhone. iPad I think may be around a quarter now.
- Steko 14y ago
  Here's Horace Dediu's estimate for Q3, I doubt the most recent quarter is much different in terms of iOS share: http://www.asymco.com/2012/08/21/the-interlopers/ http://www.asymco.com/2012/08/21/the-interlopers/ Looks like 90% ish. Really astounding to see Apple and MS profits side by side like that. From ~10% of MS to nearly double over less than five years.
- kitsune_ 14y ago
  And we're only speaking of Samsung Electronics here. The entire conglomerate is on another level and approx. double the size of Samsung Electronics.
blinkingled 14y ago
Whoa - For a moment I was convinced $7.4B was revenue. That's profit which is impressive to say the least. Next somewhat unexpectedly 2/3rd of the profits are from mobile division - Smartphone sales mainly. Wonder if all the parts Samsung supplies to Apple make them so little profit (they sell displays, DRAM, Flash and make Apple's SoC for them) that they could just stop doing that and their bottomline would be hardly touched. I am sure I am misreading something here - or may be margins are just razor thin in everything Samsung sells to Apple.
- hkmurakami 14y ago
  Supplying Apple those components brings scale to the production process that is leveraged in supplying their own handheld devices, so I'd venture to conjecture that without this business with Apple, Samsung's overall profits will fall as well just in their mobile division, as costs rise.
  - blinkingled 14y ago
    I doubt it would amount to very much. They sold 58 million SmartPhones vs Apple's 26 million iPhones and 14 million iPads or so and Samsung is just one of many Apple suppliers.
    - hkmurakami 14y ago
      The key is that they effectively double their foundry output by supplying Apple their chips, which means that every one of their 58 million smartphones can have a larger margin. That's huge.
- nandemo 14y ago
  Note that Samsung is a huge conglomerate. I suppose this is news is posted here because some many people on HN tend to view Samsung is an "Apple rival" (and for some odd reason a lot of people "root" for tech companies), but Samsung is more like a Korean version of what General Electric used to be. According to Wikipedia, Samsung's revenue in 2011 was U$247 billion. That's about the nominal GDP of Hong Kong or Israel.
confluence 14y ago
> Earnings from the chip division, where Samsung competes against Toshiba Corp and SK Hynix Inc, dropped 28 percent to 1.15 trillion won as prices of dynamic random access memory (DRAM) chips sagged, though a recovery in NAND flash chips, widely used in mobile devices, helped offset the weakness. The company said it expected DRAM oversupply to run on into the current quarter, but sees a tight NAND flash memory market. Intel had the same problem. They switched markets from commodity to monopoly. They're still around. I've noticed Samsung's ability to crush it since about March of last year and have been long Korean tech dominated ETFs to hedge my Apple stock - which I recently sold and subsequently shorted. Samsung is Dell with profits. It in combination with Android will destroy the iOS ecosystem. Here's to profits with openness. May the Microsoft strategy once again prevail. Apple was good while it lasted and it brought a lot of great tech forward by a few years. But they're out of screens to attack - just like Microsoft is really out of operating systems to attack. Disclaimer: I'm long Samsung, and will be long Google once more if the price drops further. You never bet against Linux in the long term. Just like you never bet against capitalism or democracy. Linux always wins.
- clarky07 14y ago
  While I think Samsung is a great stock and company, it's not like Apple is failing miserably. Shorting it here seems like a scary idea. They have 120 billion in the bank with a PE < 15. ex cash it's 10 or 11.
  - confluence 14y ago
    My short was at 700. I'm up ~15% where they had a P/E of ~17. I'm not too worried. Apple was worth ~$700 billion and based on future growth prospects, market saturation, commodity competition and the squeeze currently being put on by the entire world's electronic manufacturing community backing Android on both the high/low ends and in terms of sheer volume (millions of activations per day) - I feel rather secure. Apple is being Netscape'd. No company can survive a full world supply squeeze with path dependent adoption. Even with their cash horde (which they are paying out because they literally can't use it) they can't directly confront hundreds of billions in global investment in electronics manufacturing through South East Asia chasing Apple's profits. If they do try - they'll be Solyndra'ed. Screens are now commodity (see lagging iPad). However, I've been thinking of closing up my short this week so who knows - I might buy. Investors who win are investors who think and always have the ability to change their minds, reverse direction and go all in if the fundamentals change. I don't really care either way.
ameyamk 14y ago
This is why I am bullish on Google. I think motorola with Google will eventually figure it out and will take half of those $5B+ mobile profits from Samsung.
- lostlogin 14y ago
  I suggest reading Asymco before backing that idea with cash. His stats on cell phone makers which are down on their luck is sobering. My short (and hopefully not too inaccurate summary) is that once a cell phone maker stops making money, they never recover. Edit for spelling
  - ZeroGravitas 14y ago
    Personally I'm glad I didn't put any money on Asymco's predictions back when he thought Modular(i.e. Android + WinPhone combined) was going to be limited to 30% of the market (last time I checked Android was about 70% on it's own) and that the companies with the right idea where Interdependant (i.e. RIM and Nokia). Ouch. What do you have to believe for an Android dominated future? (from end of 2010): http://www.asymco.com/2010/11/03/what-do-you-have-to-believe-for-an-android-dominated-future/ http://www.asymco.com/2010/11/03/what-do-you-have-to-believe... quote: "So what’s the bottom line? For an Android dominant future, several conditions must be met; one will need to believe all of these to be true: * The addressable market for modular solutions will have to grow much faster than that of inter-dependent vendors. [The chart shows in-line growth--again due to the overall growth of the market. The green guys above won't just roll over.] * The split of licenses between Android and Windows Phone within the addressable market must favor Android. [Again, this is unlikely as "politics" will interfere. (I won't even touch IP issues.)] * The current modular vendors will not become inter-dependent or the current inter-dependent vendors will become modular. [Now why would they tear themselves apart if they are growing?] * The profitability of Android vendors must be high enough to make modularity sustainable [more about this later.]" So to believe in an Android dominated future, you'd need to believe 4 things, that he's sure won't happen, that all turned out to happen, and to an extreme degree (e.g. Android vs Winphone market share which he predicts at roughly 10/20 percentage points is more like 70/5, Samsung is clearly making Android profitable, Nokia shopped itself to both Android and Winphone and no-one would be surprised if RIM did likewise, etc. etc.). Does this mean he believes in an Android dominated future now? Somehow I doubt it.
deleted 14y ago
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- megablast 14y ago
  Then you need to look around more. Samsung have been beating Apple is shipments for the last few quarters. The SGIII really bought it home for Samsung. Together Samsung and Apple currently have over half of all shipments, and Apple ship about half of what Samsung ship. So your estimate is quite correct.
deleted 14y ago
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59 points by ari_elle 14y ago

Wow.. Good job.

By comparison, Apple just posted $8.22 billion of net income. [http://www.nytimes.com/2012/10/26/technology/apple-profits-rise-24-on-iphone-5-sales.html http://www.nytimes.com/2012/10/26/technology/apple-profits-r...]. Approximately $5.1B of Samsung's profits came from their phones; this is despite Samsung being an extremely diversified company. I cannot find what proportion of Apple's profits come from sales of iPhone and iPads; they do, however, make up a majority of their revenue.

ari_elle 14y ago
As you stated, "I cannot find what proportion of Apple's profits come from sales of iPhone and iPads; they do [...] make up a majority of their revenue." it's imo very safe to assume that. They sold an astonishing 26.9 million iPhones in Q3, 58 percent growth compared 2011. Also 14.0 million iPads (Q3), 26 percent growth. With a 4.9 million Macs sold (only 1 percent unit increase) and a 19 percent decline with Ipods, i guess it's safe to assume that most of their revenue (especially additional revenue compared to last Q3 earnings) comes from Iphones/Ipads. All numbers from official press release: http://www.apple.com/pr/library/2012/10/25Apple-Reports-Fourth-Quarter-Results.html http://www.apple.com/pr/library/2012/10/25Apple-Reports-Four... Anyway: Good job Samsung :)
- clarky07 14y ago
  they make roughly half their profit from iPhone. iPad I think may be around a quarter now.
Steko 14y ago
Here's Horace Dediu's estimate for Q3, I doubt the most recent quarter is much different in terms of iOS share: http://www.asymco.com/2012/08/21/the-interlopers/ http://www.asymco.com/2012/08/21/the-interlopers/ Looks like 90% ish. Really astounding to see Apple and MS profits side by side like that. From ~10% of MS to nearly double over less than five years.
kitsune_ 14y ago
And we're only speaking of Samsung Electronics here. The entire conglomerate is on another level and approx. double the size of Samsung Electronics.

blinkingled 14y ago

Whoa - For a moment I was convinced $7.4B was revenue. That's profit which is impressive to say the least. Next somewhat unexpectedly 2/3rd of the profits are from mobile division - Smartphone sales mainly. Wonder if all the parts Samsung supplies to Apple make them so little profit (they sell displays, DRAM, Flash and make Apple's SoC for them) that they could just stop doing that and their bottomline would be hardly touched. I am sure I am misreading something here - or may be margins are just razor thin in everything Samsung sells to Apple.

hkmurakami 14y ago
Supplying Apple those components brings scale to the production process that is leveraged in supplying their own handheld devices, so I'd venture to conjecture that without this business with Apple, Samsung's overall profits will fall as well just in their mobile division, as costs rise.
- blinkingled 14y ago
  I doubt it would amount to very much. They sold 58 million SmartPhones vs Apple's 26 million iPhones and 14 million iPads or so and Samsung is just one of many Apple suppliers.
  - hkmurakami 14y ago
    The key is that they effectively double their foundry output by supplying Apple their chips, which means that every one of their 58 million smartphones can have a larger margin. That's huge.
nandemo 14y ago
Note that Samsung is a huge conglomerate. I suppose this is news is posted here because some many people on HN tend to view Samsung is an "Apple rival" (and for some odd reason a lot of people "root" for tech companies), but Samsung is more like a Korean version of what General Electric used to be. According to Wikipedia, Samsung's revenue in 2011 was U$247 billion. That's about the nominal GDP of Hong Kong or Israel.

confluence 14y ago

> Earnings from the chip division, where Samsung competes against Toshiba Corp and SK Hynix Inc, dropped 28 percent to 1.15 trillion won as prices of dynamic random access memory (DRAM) chips sagged, though a recovery in NAND flash chips, widely used in mobile devices, helped offset the weakness. The company said it expected DRAM oversupply to run on into the current quarter, but sees a tight NAND flash memory market. Intel had the same problem. They switched markets from commodity to monopoly. They're still around. I've noticed Samsung's ability to crush it since about March of last year and have been long Korean tech dominated ETFs to hedge my Apple stock - which I recently sold and subsequently shorted. Samsung is Dell with profits. It in combination with Android will destroy the iOS ecosystem. Here's to profits with openness. May the Microsoft strategy once again prevail. Apple was good while it lasted and it brought a lot of great tech forward by a few years. But they're out of screens to attack - just like Microsoft is really out of operating systems to attack. Disclaimer: I'm long Samsung, and will be long Google once more if the price drops further. You never bet against Linux in the long term. Just like you never bet against capitalism or democracy. Linux always wins.

clarky07 14y ago
While I think Samsung is a great stock and company, it's not like Apple is failing miserably. Shorting it here seems like a scary idea. They have 120 billion in the bank with a PE < 15. ex cash it's 10 or 11.
- confluence 14y ago
  My short was at 700. I'm up ~15% where they had a P/E of ~17. I'm not too worried. Apple was worth ~$700 billion and based on future growth prospects, market saturation, commodity competition and the squeeze currently being put on by the entire world's electronic manufacturing community backing Android on both the high/low ends and in terms of sheer volume (millions of activations per day) - I feel rather secure. Apple is being Netscape'd. No company can survive a full world supply squeeze with path dependent adoption. Even with their cash horde (which they are paying out because they literally can't use it) they can't directly confront hundreds of billions in global investment in electronics manufacturing through South East Asia chasing Apple's profits. If they do try - they'll be Solyndra'ed. Screens are now commodity (see lagging iPad). However, I've been thinking of closing up my short this week so who knows - I might buy. Investors who win are investors who think and always have the ability to change their minds, reverse direction and go all in if the fundamentals change. I don't really care either way.

ameyamk 14y ago

This is why I am bullish on Google. I think motorola with Google will eventually figure it out and will take half of those $5B+ mobile profits from Samsung.

lostlogin 14y ago
I suggest reading Asymco before backing that idea with cash. His stats on cell phone makers which are down on their luck is sobering. My short (and hopefully not too inaccurate summary) is that once a cell phone maker stops making money, they never recover. Edit for spelling
- ZeroGravitas 14y ago
  Personally I'm glad I didn't put any money on Asymco's predictions back when he thought Modular(i.e. Android + WinPhone combined) was going to be limited to 30% of the market (last time I checked Android was about 70% on it's own) and that the companies with the right idea where Interdependant (i.e. RIM and Nokia). Ouch. What do you have to believe for an Android dominated future? (from end of 2010): http://www.asymco.com/2010/11/03/what-do-you-have-to-believe-for-an-android-dominated-future/ http://www.asymco.com/2010/11/03/what-do-you-have-to-believe... quote: "So what’s the bottom line? For an Android dominant future, several conditions must be met; one will need to believe all of these to be true: * The addressable market for modular solutions will have to grow much faster than that of inter-dependent vendors. [The chart shows in-line growth--again due to the overall growth of the market. The green guys above won't just roll over.] * The split of licenses between Android and Windows Phone within the addressable market must favor Android. [Again, this is unlikely as "politics" will interfere. (I won't even touch IP issues.)] * The current modular vendors will not become inter-dependent or the current inter-dependent vendors will become modular. [Now why would they tear themselves apart if they are growing?] * The profitability of Android vendors must be high enough to make modularity sustainable [more about this later.]" So to believe in an Android dominated future, you'd need to believe 4 things, that he's sure won't happen, that all turned out to happen, and to an extreme degree (e.g. Android vs Winphone market share which he predicts at roughly 10/20 percentage points is more like 70/5, Samsung is clearly making Android profitable, Nokia shopped itself to both Android and Winphone and no-one would be surprised if RIM did likewise, etc. etc.). Does this mean he believes in an Android dominated future now? Somehow I doubt it.

deleted 14y ago

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megablast 14y ago
Then you need to look around more. Samsung have been beating Apple is shipments for the last few quarters. The SGIII really bought it home for Samsung. Together Samsung and Apple currently have over half of all shipments, and Apple ship about half of what Samsung ship. So your estimate is quite correct.

deleted 14y ago

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