Even though priced like a firm in deep financial distress, Samsung Electronics likes to sit on a massive cash stockpile and finds such manufacturing advantages that can be matched by no rival. Recently, there had been a dip in the South Korean firm’s profit for the very first time in two years because of the falling margins in the high end smartphone market. However, in the long term, the massive technology giant is poised to benefit from an industry shakeout that would give its share in the smartphone market a huge boost, so much so that it will rise up from one third to half. It is expected that there could be as much as 30% rise in share price in a year.
There is only one slight caveat; the company isn’t exactly known for its welcoming attitude towards US-based investors or shareholder-friendliness for that matter. Samsung Group is the largest in South Asia amongst the numerous other powerful conglomerates that were able to proper the country from wreckage to economic might with some government favor. Even though the conglomerate has varied interests like life insurance, shipbuilding and advertising, its crown jewel is Samsung Electronics that saw a 14% increase in sales totaling $212 billion. In comparison, Apple had reported $170.9 billion sales in its last fiscal year.
The company makes display panels, application processors, memory and other device innards. Therefore, the cost of its computer-driven gadgets such as televisions, cameras, medical devices and even home appliances is kept low, but the company’s smartphone business accrues the biggest advantage. Today’s smartphone companies boast of cramming desktop computing power into slim and fragile handsets. However, computing gains have become more complicated and expensive to come by as the industry is rubbing against limits imposed by thermodynamics and physics. At the same time, growth in the smartphone market has slowed and become saturated.
This combo of slowing growth and rising costs means that industry laggards will fall just like BlackBerry and Nokia did. This leaves a greater market share for companies that can make massive sales for offsetting expensive product development. According to analysts, Samsung will emerge in a more competitive and stronger position than before from the smartphone bloodbath that will take place in the next several months. The South Korean giant has also been making investments in a chip foundry business due to which it is in a much better position for investing in manufacturing upgrades. Over the past year, there has been a 10% decline in Samsung’s shares. There was a 6% decline in the fourth quarter’s operating profit of the company.
It was the introduction of new iPhones in September that had drawn away the sales from Samsung’s Galaxy branded smartphones and led to a profit decline. Nonetheless, the South Korean manufacturer is all set to make a comeback in this month as it prepares for the launch of its latest flagship smartphone, which is the Galaxy S4. Although the company hasn’t indulged in much public fanfare with this smartphone, there are still huge expectations concerning it.