Samsung’s Convergence Device Prospects Remain Strong

I recently covered Samsung, a major vendor of iPhone’s components which also has the manufacturing and design capabilities to become the iPhone’s major competitor in the future. This post will take a look at the company since its earnings release on 12 October.

For the third quarter ending Sept. 30, 2007, Samsung reported revenues of 16.68 trillion won or $18.16 billion, a y-o-y increase of 9.6% and a sequential increase of 14%. Net income was 2.19 trillion won or $2.38 billion, up 1% y-o-y and 54% sequential increase after three consecutive quarters of losses.

Segment-wise, Samsung reported a sequential increase of 18% and y-o-y increase of 2% to 5.01 trillion won in the Semiconductors segment. Within the segment, revenue from Memory was down 2% y-o-y but up 16% sequentially to 3.58 trillion won. DRAM prices dropped from slow down in the spot market. However, NAND saw high profit from the rising demand with launch of iPhone and other smartphones. The NAND demand should continue for a long while going forward.

The Telecom segment saw revenue go up 13% sequentially and 8% y-o-y to reach 5.08 trillion won. With an improved product mix, Samsung shipped 42.6 million units (up 14% sequentially, 47% y-o-y) and increased its domestic 3G market share. It plans to further improve its product mix with more models including the Samsung G800, a 5 MP camera phone with 3x optical zoom; the Samsung F700, a fully capable internet mobile, and the Samsung i550, a phone with GPS and HSDPA 3.6 Mbps. This is the segment where Samsung competes with the iPhone and other convergence device vendors.

The LCD segment had revenues of 4.02 trillion won, up 20% sequentially and 34% y-o-y. Strengthening its No.1 position in the FPTV market, Samsung increased its shipments 119% y-o-y and 25% sequentially. The Digital Media segment had revenues of 1.48, up 2% sequentially and down 9% y-o-y. Revenues in the Appliances segment were down 2% sequentially and up 12% y-o-y to 0.93 trillion won.

Its stock price has fallen around 9% this year and is trading around 557,000 won ($606) in the Korean stock exchange. I am, however, still a believer in Samsung’s prospects due to its rather complex and interesting set of trend alignments. It has high caliber and cost-efficient manufacturing capacity and expertise, and is the only player that is vertically integrated all the way from the end-user device to chips and memory manufacturing. Samsung also has good design skills.

I fully expect the convergence device market to be brutally competitive, and in a few quarters, Samsung will be in a position to play some pricing tricks that may be very difficult for the others to match!