New Delhi, April 30: Investors in Samsung, the world’s top maker of memory chips and flat screen TVs, might overlook that question as the South Korean company repeatedly beats estimates as sales from its mainstay businesses boom in a global economic recovery.
However, rapid spending by leading chip companies and Samsung’s weak footing in the lucrative smartphone sector dominated by Apple and Research In Motion could play spoilsport to Samsung’s rapid growth.
“Samsung and other vendors won’t be able to easily get into the high-end area which Apple and RIM dominate and earn over 40 percent margin. So, no blue ocean for Samsung,” said Kim Woo-jung, a fund manager at LS Asset Management, which owns Samsung shares.
Samsung and home rival LG Electronics together control over 30 percent of global mobile market, but their share in the booming smartphone market is below 5 percent.
This week, Motorola Inc beat profit estimates on better-than-expected demand for smartphones, while shares in top mobile phone maker Nokia fell 14 percent as it cut its profit outlook.
Samsung forecast record second-quarter results on Friday and aims to sharply boost spending as consumers snap up gadgets and appliances, marking a steep sector recovery that has benefitted firms including Intel and IBM.
Samsung’s diversified product portfolio from components such as chips and LCDs to finished consumer goods such as handsets, TVs and appliances have helped the technology powerhouse beat rivals in earnings growth.
It said it would “substantially increase” spending in 2010 from its previously announced 8.5 trillion won.
The spending plan underscores an aggressive push toward new technology by Lee Kun-hee, who returned as Samsung chairman last month and has orchestrated its successful foray into the chip business since the early 1980s.
Lee, 68, has repeatedly warned most businesses and products that represent Samsung today would disappear from the market in 10 years and the company needed to start again.
Shares in Samsung, valued at around $107 billion, ended 2.9 percent higher in a broader market up 0.8 percent. The shares have slipped 3 percent after hitting a record high in early April on growing worries of oversupply in LCD and chips.
—-Agencies