The New Big Blue

Samsung Electronics confirmed its status as the world's largest technology company by posting record sales and operating profit for last year, edging Hewlett-Packard (HP) of the United States and Siemens of Germany.

Models show the latest handsets of Samsung Electronics’ Omnia smartphone series. Increased handset sales played a huge role in Samsung posting record profits in 2009. / Korea Times

Samsung Tops HP, Siemens With Record 2009 Sales

By Kim Yoo-chul
Staff Reporter

Samsung Electronics confirmed its status as the world's largest technology company by posting record sales and operating profit last year, edging Hewlett-Packard (HP) of the United States and Siemens of Germany.

In a regulatory filing to the Korea Exchange (KRX), Friday, the company said it recorded 136.29 trillion won (about $117.4 billion) in sales globally in 2009, representing an annual 15.1 percent growth.

Samsung's revenue last year was higher than HP's $114.6 billion and Siemens' $109.8 billion, while its operating profit of 10.92 trillion won represented a 91.2 percent year-on-year increase.

The company released its annual and fourth-quarter results on a consolidated basis, an international accounting standard that includes overseas performances.

Industry watchers believe that the Korean technology giant will be in a position to widen the gap with its competitors this year, with the improving economic conditions around the world expected to drive up demand for consumer electronics products.

Robert Yi, chief of Samsung's investor relations team, said the company is aiming for double-digit growth in sales this year driven by the boost in consumer demand, and revenue of 150 trillion won (about $130 billion) for 2010 appears to be a realistic goal.

HP, Samsung's biggest global rival in sales, is projecting about $120 billion in sales for 2010.

"The increased sales last year was thanks to balanced performances in our major markets, including memory chips, flat-screens, mobile phones and consumer electronics devices such as televisions," said a Samsung spokesman Luke Cho.

Samsung is the world's largest maker of DRAM and NAND flash memory chips and also leads in liquid crystal displays (LCDs). The company is also the biggest producer of flat-screen televisions and trails Nokia as the No. 2 handset vendor.

Clicking on All Cylinders

Samsung cited "three key drivers" ― memory chips, LCDs and mobile phones ― to explain its lucrative 2009.

Rising consumer demand for premium products such as smartphones, light-emitting diode (LED) backlit LCD televisions, and tablet-style computers boosted chip prices, and Samsung was in an ideal position to benefit from this.

Samsung's memory chip division posted 26.85 trillion won in sales in 2009, more than a 20-percent annual increase. The division also posted 2.4 trillion won in operating profit, recovering to its level of two years ago.

Its LCD division posted a record 22.28 trillion won in annual revenue and an operating profit of 1.38 trillion won.

Samsung's telecommunications division, which is in charge of the company's mobile-phone business, managed 42.09 trillion won in sales last year, nearly 22-percent annual growth, and 4.13 trillion won in operating profit.

Samsung sold more than 227 million mobile phones worldwide last year, the company said.

The digital media division posted 2.85 trillion won in operating profit last year thanks to strong sales of LED-backlit LCD TVs in developed and some developing markets.

Its flat-screen TV sales exceeded 30 million for the full last year, including 2.6 million LED-backlit LCD TVs.

"Samsung benefited from stable price moves in chips and LCDs in the latter half of last year despite unfavorable seasonality. The massive return of its chip business was remarkable," Lee Ka-keun, an analyst at IBK Securities, said.

DRAM chips are widely used in traditional PCs, while NAND flash memories go into high-end digital devices such as smartphones, net-books, digital cameras and tablet PCs. LCDs are used in everything from handsets to televisions.

For the fourth quarter alone, Samsung earned 3.7 trillion won from 39.24 trillion won in sales. For the full year, Samsung had earned 9.65 trillion won, up from 5.53 trillion won in 2008.

"The annual profit far exceeded all other years except for 2004," Cho of Samsung said.

Improving Outlook

Inspired by a better outlook for the global consumer electronics market, Samsung Electronics is planning to revise up its 2010 investment target, which analysts say is "reasonable."

"We are seriously considering raising our investment in memory chips to boost cost competitiveness and to respond to improving consumer demand for products," the IR chief told analysts in a conference call.

Also, Yi said LCD panel demand in the first quarter will remain "very strong" due to Chinese demand for TVs and monitors.

The senior executive added the upcoming World Cup and Labor Day holiday in China will continue to support demand in the second quarter, although new supply growth was likely to surpass demand in the seasonally strong third quarter.

Investment in memory chips and LCDs is expected to reach over 10 trillion won from the company's earlier official projection of 8.5 trillion won, company officials said.

Samsung is expected to spend 18 trillion won including 8 trillion won for research and development (R&D) this year, officials say.

"Booming smartphones and an inspiring outlook for tablet PCs will offer new growth opportunities for Samsung's chip business. Chips will drive Samsung's earnings this year, while LCDs will back it up," Lee Min-hee, an analyst at Dongbu Securities, said, adding a strengthening won won't be a big drag on Samsung's overall performance.

Although a number of analysts and even top Samsung executives are painting a rather bullish outlook for this year, some are still skeptical over Samsung's route in smartphones.

Samsung has a 20 percent market share in overall mobile phones, but it has only about 3 percent of the smartphone market.

Samsung executives say smartphones will boost the company's profits but still it lacks the competitiveness in its own mobile platform ― Bada, or "ocean" in Korean.

"In developed markets, Samsung will release a variety of offerings that provide different operating systems. We are leading the global touch-screen mobile market," Kim Hyeong-do, an executive at the company's telecom unit told analysts in the call.

Samsung executives also said it would aim to sell 2 million 3D TVs in 2010, a new product category that is expected to help as the company copes with very tight margins in the price-sensitive market.

yckim@koreatimes.co.kr