Smartphones boost Samsung Electronics profits

Samsung Electronics says that it expects its profits to surge 79% in the second quarter as sales of its smartphones continue to grow.

It has forecast an operating profit of 6.7 trillion won ($5.9 billion) for the period, its highest quarterly profit since 2008.

Samsung overtook Nokia as the world’s biggest maker of mobile phones earlier this year.

Analysts said its profits may rise even further in the coming months.

“Earnings will be stronger in the current quarter as sales of the high-end Galaxy S III will increase dramatically and drive the telecom division’s earnings to above 5 trillion won,” said Nho Geun-Chang an analyst with HMC Investment Securities.

“We estimate shipments of the Galaxy S III will reach 19 million units in the third quarter.”

Samsung launched the Galaxy S III, the latest version of its Galaxy range of smartphones, in May this year, and the gadget has been well received in the market.

Last month, the head of Samsung’s mobile phone division Shin Jong-kyun said that the firm expects to sell 10 million units of the model by July.

While it has enjoyed early success, some analysts were of the view that its sales may slow towards the end of the year due to the widely-expected launch of the latest version of the Apple iPhone.

The iPhone is seen by most analysts as the biggest rival to Samsung’s smartphones.

“We expect a correction in Samsung’s earnings in the fourth quarter, as the launch of the new iPhone will lead to a decline in Samsung’s profit in the high-end smartphone business,” said Park Jong-Min a fund manager with ING Investment Management.

Increased competition from the iPhone is not the only challenge Samsung has to deal with in the coming months.

It is also involved in a number of legal disputes over patent infringements with Apple in various countries across the world.

Earlier this month, a court banned sales of Samsung’s Galaxy Nexus smartphone and also its Galaxy Tab 10.1 tablet PC in the US, until it decides on the continuing patent case between the two firms.

There are concerns that the ban may hurt Samsung’s sales in one of its key markets.

Analysts said the biggest fear for Samsung is that the dispute may become bigger and impact other Samsung products, including the Galaxy S III.

“What they are worried about are the legal spill over effects,” said Jasper Kim of Asia Pacific Global Research Group.

“How Judge Lucy Koh’s decision to block some of these Samsung smartphones into the US market, which is Samsung’s largest mobile carrier market, will effect Galaxy S III sales. That’s what Samsung is really worried about.”