Samsung is saying what I’m saying about mobile growth

Samsung released earnings today that showed record profit but they warned that growth of handset sales was slowing because of increasing competition.

Here’s the interesting bit though. Samsung “said that the strongest growth in the future would come in the market for low cost handsets in developing countries,” according to the Irish Independent. This is what I have been saying for a number of months – and one reason I believe this favours Android as a mobile platform over iOS which is positioned mostly as a premium product.

The way I laid it out in July was that “I see this as a land grab right now. The operating systems that can grab as much share as possible while people are upgrading from cheapie phones to inexpensive Smartphones will win. Right now Android is leading the charge.” And my contention last month was that “the market for high-priced mobile devices in developed economies is saturated. Almost everyone who is willing to purchase an expensive smartphone has done so. Therefore, the market for expensive smartphones is now dependent on the consumer upgrade cycle like the PC market before it. This will put inexorable downward pressure on handset average selling price.”

I see the poor Apple guidance and the Samsung statement as validation of this thesis.

On the merits of Samsung’s quarter, here are the numbers as communicated on TechCrunch:

Samsung already gave us a hint of what to expect to see in its latest quarterly financials, but now the Korean consumer electronics titan has released its earnings for all to see. Here’s the gist of the company’s fiscal Q4 2012 figures: Samsung reported a whopping 56.06 trillion won (which works out to $52.4 billion) in revenue, along with 8.84 trillion won (roughly $8.27 billion) in operating profit.

In case you were curious, those are some awfully hefty year-over-year gains for Samsung. The company’s Q4 2012 revenue figure is 18.52 percent larger than it was in Q4 2011, and Samsung’s profit this quarter surged to an impressive 89.3 percent from what it reported last year. The company also released its fiscal 2012 figures — this past year, Samsung scored a net profit of 23.8 trillion won ($22.25 billion) on revenue of 201 trillion won ($187.9 billion).

Mobile has always been a key market for Samsung, but the release is terribly vague when it comes to breaking down exactly how the company did with regard to units sold. Even so, revenue from Samsung’s Mobile Communications division grew 4 percent from the prior quarter, and Samsung specifically calls out the Galaxy S III and Galaxy Note II as key performers — the inclusion of the latter isn’t much of a shock considering it sold around 5 million units in its first two months on the market, and is reportedly nearing 10 million units sold globally. Taking a step back, Samsung’s IT and Mobile Communications unit as a whole reported 5.44 trillion won ($5.09 billion), slightly down from Q3 but more than double the 2.56 trillion won ($2.39 billion) Samsung recorded in the year-ago quarter.

The rest of Samsung’s business units fared rather nicely, as well, with the company’s consumer electronics and semiconductor divisions generating quarterly profits of 740 billion won ($691.6 million) and 1.42 trillion won ($1.33 billion), respectively. Not quite as shocking as the mobile side of things, but both units handily shot past the figures they posted last quarter by a large margin.

So, great quarter, but the key takeaway is that mobile sales growth is slowing, and moving to lower priced handsets, reducing average selling price. This means increasing emphasis on emerging markets and feature phone to smartphone upgrades or smartphone upgrade cycles in developed markets.

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