Analysts: Samsung maintains handset lead in Q4, but slowdown may be coming

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Samsung Electronics maintained its status as the world's largest handset and smartphone maker in the fourth quarter, according to analysts' estimates, en route to another record quarter in terms of sales and profits. However, financial analysts and even the company itself warned that Samsung's meteoric smartphone growth is likely to slow in the months ahead.

Overall, the South Korean electronics conglomerate reported a net profit of $6.6 billion, up 76 percent from $3.76 billion in the year-ago period and besting the previous record of around $6 billion in the third quarter. Total revenue for the firm, which makes everything from handsets to TVs, refrigerators and chipsets, jumped 18 percent year-over-year to close to $52.6 billion.

The results were again largely powered by Samsung's mobile business, particularly its Android devices like the Galaxy S III smartphone and Galaxy Note II phablet. Samsung's mobile phone and telecommunications equipment division made up 62 percent of the company's overall $8.3 billion operating profit in the quarter. Sales in its mobile unit climbed to $25.5 billion, up more than 58 percent from $16.1 billion in the year-ago period.

Starting in the middle of 2011 Samsung stopped reporting how many handset and smartphone units it shipped, making it a quarterly parlor game to estimate how many units the company shipped and where it stands relative to its peers. Research firm Strategy Analytics said Samsung shipped 108 million total handsets in the period, up from the 95 million it estimated for the fourth quarter of 2011. IDC had slightly higher but similar figures, reporting Samsung shipped 111.2 million feature phones and smartphones combined in the quarter, up from the 99 million it estimated in the year-ago period. Strategy Analytics put Samsung's global handset market share at 24 percent while IDC had it at 23 percent.

In terms of their estimates of Samsung's smartphone performance, the two firms were also fairly similar. Strategy Analytics pegged Samsung's smartphone shipments in the fourth quarter at 63 million and its market share at 29 percent, while IDC estimated 63.7 million smartphone shipments and also gave Samsung a 29 percent global smartphone market share.

Samsung itself provided a little bit of color about its quarter and its overall outlook for 2013. Samsung said that overall smartphone market demand increased from the third quarter in both developed and emerging markets, and that it benefited from its smartphone and tablet line, especially the Galaxy Note II. Samsung said earlier this month that global sales of its flagship Galaxy S smartphone line surpassed 100 million. Of the total, Samsung said the original Galaxy S, released in 2010, reached 24 million sales; the S II, released in 2011, had 40 million; and the S III, released in 2012, achieved more than 40 million unit sales as well.

Looking ahead to 2013, Samsung said it expects intensified competition and feature phone demand to slip as more customers move to low-end smartphones. Yet emerging markets will lead the smartphone push for low and mid-range products, the firm said. Samsung said it expects a weaker first quarter in mobile phones due to the expected seasonal drop in demand.

Samsung may be running into the law of large numbers that some analysts think is affecting rival Apple (NASDAQ:AAPL): A company that has grown so large so fast cannot be expected to maintain that same level of growth for an extended period of time. Samsung is more insulated than Apple though, especially in mobile, because it has a wider product portfolio. Apple sold a record 47.8 million iPhones in the fourth quarter largely on the back of three models: the new iPhone 5, the iPhone 4S and older iPhone 4.

"Fourth-quarter results were good, but the problem now is what lies ahead," Kim Hyung Sik, a Seoul-based analyst with Taurus Investment Securities, told Bloomberg about Samsung. "The high-end smartphone market has largely become saturated, while the fast Chinese growth in the lower segment will make it difficult for anyone to see strong profit growth there."

Underscoring that, IDC noted that Huawei is now the world's No. 3 smartphone maker by volume and Chinese rival ZTE is No. 5. "Chinese vendors are growing fast," Kim Hyun Joon, vice president at Samsung's mobile communications business, said on a conference call, according to Bloomberg. Global market growth will trend "somewhat weaker" starting this year, he said.

For more:
- see this Samsung release
- see this Samsung presentation (PDF)
- see this Strategy Analytics release
- see this separate Strategy Analytics release
- see this IDC release
- see this WSJ article (sub. req.)
- see this Bloomberg article
- see this Reuters article

Special Report: Wireless in the fourth quarter of 2012

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