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Smartphone demand pushes Samsung’s Q3 earnings to a record

samsung_demandSamsung has officially reported earnings for the third fiscal quarter of 2013, which break its personal best, beating its own expectations. The company announced 59.08 trillion won (roughly $55 billion) in revenue and 10.16 trillion won in operating profit, making for its best quarter yet. Operating profit was the main source of gain for the company, jumping 7% from second fiscal quarter 2013 and making a larger 26% gain from 2012.

The mobile division, Samsungs biggest earnings generator, reported a record 6.7 trillion won profit as a greater variety of cheaper Galaxy smartphones boosted shipment volumes and helped counter weakening growth in the high-end segment. Samsungs better-than-forecast earnings follow Wednesdays news that Samsung has moved 40 million Samsung Galaxy S4 units in the devices first six months.

Sales of the Galaxy S4 and Galaxy Note 3 stayed at the same level as the previous quarter. Samsung credits the sale of low-cost handsets across emerging markets, China, South America, and eastern Europe, for making it so much money. Samsungs semiconductor business saw the biggest gains during the 90 days, with revenue jumping 12% from Q2.

“Because of the higher mix of mid- to low-end smartphones, the margins will be getting lower gradually,” said CW Chung, an analyst at Nomura, adding that the threat from low-cost Chinese competitors should not be overstated. “Except for Samsung and Apple everyone is making losses – the gap between the top two and the rest is too wide.”

Memory chip prices have rebounded this year as some competitors were pushed out of the market from the market, the remaining producers have held back from expanding capacity, while prices got an large boost from a fire in September at an SK Hynix factory in China.

“We believe this is a structural recovery in the industry, not a short-term rebound,” said for Financial Times, Mark Newman, an analyst at Sanford C Bernstein. “Due to the consolidation and technological hurdles in the industry, supply growth will remain permanently constrained . . . this is a permanent reset of the margins at a higher level.”

Shares in Samsung, worth $222 billion, added 10% over the past three months, outperforming a 7% gain in the wider market.

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