Barely 24 hours after Apple announced the biggest quarterly profit in history, smartphone rival Samsung Electronics reported that its own quarterly earnings fell 27 percent in Q4, and it now sells just about as many smartphones as Apple.
Samsung said its overall smartphone sales for the quarter were between 72.2 million and 75.1 million units — meaning that Apple, with its record-high 74.5 million iPhones during the same period, has closed the gap with the Android shipments king. That came in a year when Samsung’s IT and Mobile division, which makes its smartphones, saw its Q4 profits drop to 1.96 trillion won ($1.8 billion) from 5.47 trillion won ($5 billion) in 2013.
What saved Samsung from catastrophe and allowed it to bump up its shareholder dividend by 40 percent despite 2014’s stunning slowdown in phone sales? Steller performance from its semiconductor division, which makes memory and other chips for many phone makers — including Apple.
Samsung’s sales were hammered on the high end by Apple’s new iPhone 6 models, which finally matched Samsung’s large screens, and by less expensive phones from competitors like Xiaomi, which overtook Samsung’s unit sales in China and has now been overtaken by Apple there.
But analysts said Samsung appears to be stabilizing. Sales of its flagship Galaxy Note 4 and other high-end phones rose from the third quarter, offsetting a drop in sales of cheaper phones. The company has also cut back on the number of models it makes, and is using its home-grown Tizen version of Linux for a low-end phone it’s now selling in India.
And while the smartphone division’s profit plunged by more than 40 percent in 2014 compared with 2013, much of the slack was taken up by the company’s semiconductor division, where profits rose by 27 percent. That was driven largely by sales of memory, including chips for phones with more than 64GB of storage, said Jeeho Baek, the senior VP who runs Samsung’s memory business. Those large memory phones include iPhone models.
Samsung is also talking with outside customers about buying the custom chips and flexible displays that Samsung manufactures and uses in its own phones. Samsung’s most advanced chips, which consume less energy than existing semiconductors, should win the bulk of orders for Apple’s next iPhones after losing out to Taiwan Semiconductor last year, analyst Lee Min Hee at I’M Investment & Securities told Bloomberg News.
Overall, Samsung’s net income, excluding minority interests, was 5.29 trillion won ($4.9 billion) for Q4, which easily beat analysts’ estimates of 4.1 trillion won. But it was down from 7.3 trillion won a year earlier. Total sales for the quarter was 52.7 trillion won ($48.2 billion), down from 59.28 trillion won in Q4 2013.