Published On: Thu, Apr 7th, 2016

Are Galaxy S7 Sales Driving Samsung Profits?

Samsung has flagged a 10% rise in first quarter profits, following the decision to release its new Galaxy S7 smartphone range early last month.

Galaxy S7

The South Korean electronics firm’s phone division has struggled in recent times amid pressure from competitors and phones seen as lacking innovation – losing market share to the likes of Apple at the top end and cheaper rivals, Huawei and Xiaomi.

But while the release of Samsung’s estimates for January to March contained no breakdown of sales for any division including its semi-conductor or TV units, analysts suggested that its decision to bring forward the roll-out of the S7 and S7 Edge was the likely driving force behind the firm’s improved forecast.

Ahead of the release of its audited results later this month, the world’s largest smartphone producer said operating profit was expected to reach around $5.6bon (£3.9bn) – a rise of 10% on the same period last year and beating most analysts’ estimates.

The result, on the face of it, would be encouraging for shareholders after a year that saw $8bn wiped from Samsung’s market value amid worries over its smartphone business and the slowdown in the world economy.

However, early gains in its share price on Wednesday were soon erased, with traders citing fears that Samsung’s move to release the S7 early had merely brought sales forward.

Greg Noh, an analyst at HMC Investment Securities, voiced doubts that the first quarter profit rise would be extended to the rest of the year.

“It will be difficult to carry on the momentum. From the next quarter, there will be a rise in marketing costs for consumer sales.

“Samsung will probably not see a higher rise in profit than it did this quarter for the rest of the year,” he added.

The company’s chip business, which has propped up Samsung’s overall performance amid the pressure on the smartphone unit, provides parts for the company’s own handsets as well as those of rivals.

They include Apple – which recently launched the new iPhone SE and a smaller model of the iPad Pro.

Huawei launches its first foray into the high-end smartphone market next week with the P9.