South Korea’s tech giant Samsung has announced record-high capital expenditure to reduce reliance on its smartphone business. But so far blistering sales of Samsung’s Galaxy handsets still create astronomic profits.
Samsung's second-quarter net profit surged a staggering 49.7 percent from a year earlier, increasing from 5.19 trillion won (3.5 billion euros) to 7.77 trillion won, according to an earnings report released by the South Korean company Friday.
Bumper profits at the world's largest technology firm came on the back of record quarterly sales, jumping 21 percent compared with the same three-month period in 2012 to reach 57.5 trillion won.
Even though Samsung didn't disclose its smartphone sales figure, mobile phone market research group IDC estimated that the technology giant had shipped 72.4 million smartphones in the quarter. The company's latest generation of Galaxy S4 handsets alone had contributed 10 million sales in the first month after it was introduced in May, IDC said.
However, Samsung's mobile business was less profitable as increasing marketing costs lowered the unit's profit for the first quarter in a year.
Fears of smartphone peak linger
Samsung's record smartphone sales boosted the firm's share in the high-end mobile phone market to 30 percent. US tech firm Apple came in second place, garnering 13 percent, on sales of 31 million handsets in the second quarter of 2013.
However, the South Korean firm said it expected growth in the smartphone segment to slow in the coming months amid the recession in Europe and increasing competition from cheaper rivals.
Nevertheless, the company's senior vice president, Robert Yi, said he expected profits to improve further in the second half of the year due to better margins for Samsung's components products, as well as from higher smartphone and TV set sales.
Yi also said that Samsung was planning to spend 13 trillion won on its semiconductor business and 6.5 trillion won on its display panel unit this year.
Analysts see the boost to Samsung's capital expenditure as a way to strengthen future bottom line profits as global smartphone markets become increasingly saturated.
uhe/slk (AFP, AP, dpa)