Samsung Electronics' 'First Mover' Strategy Pays Off

Electronics giant explores the new segment; Galaxy Note to get a jump-start in the smartphone sector; posts brilliant Q1 earnings

Samsung Electronics has recently announced its provisional earnings for the first quarter of this year, posting approximately 45 trillion won in consolidated sales, a 4.9 percent decline from the previous quarter but a 21.7 percent jump over the same period a year earlier, and approximately 5.8 trillion won in consolidated operating profit, a 9.4 percent rise over the previous quarter and a 96.6 hike over the Q1 of 2011.
The Korean electronics giant¡¯s first quarter earnings are fantastic and are more significant now that Samsung Electronics¡¯ ¡°first mover¡± strategy has paid off, particularly in the smartphone sector.
The Galaxy Note has topped the list of the factors that led Samsung Electronics¡¯ brilliant quarterly performance.
The leader in the global smartphone market has been putting forth its fullest efforts to come up with new types of gadgets tailored to meet consumers¡¯ desires. In this regard, Samsung Electronics has explored the new segment with the Galaxy Note, a combination of a smartphone and a tablet PC.
In the past, Samsung Electronics had adopted a ¡°fast follower¡± strategy to counter rivals¡¯ moves. The Korean consumer electronics maker is now shifting to the fast mover strategy ¡Æ¢â creating a new category on its own, which in return yields huge profits.
Samsung Electronics¡¯ performance in the first quarter, a slow season after the year-end peak IT season, was also owed to the company¡¯s strong showing in mainstay segments such as semiconductors and LCDs. It is the reason Samsung Electronics aims at chalking up 200 trillion won in sales and 25 trillion won in operating profit during the whole of this year.
Analysts¡¯ eyes are now on the company¡¯s performances for the second quarter and later. A majority of pundits have presented bright forecasts for Samsung Electronics¡¯ performance in the upcoming quarters, sharing the view that all business segments such as handsets, semiconductors, and LCDs are likely to have no uncertainties along the road.
Samsung Electronics is forecast to continue to make a strong showing in the cellular phone segment since the Korean company has no archrivals except Apple.
Apple released its cellular handset, the i-Phone 4S last October, competing with Samsung Electronics over the global No. 1 position, but no follow-up hit product is forecast for the American juggernaut for a while. Nokia, RIM, Motorola, HTC and other makers also haven¡¯ t released new handsets.
On the other hand, Samsung Electronics looks to solidify the global number one position in the smartphone market by unveiling the brand-new Galaxy S3 next month. It remains to be seen whether the upcoming Galaxy S3 will make a sensation, as the Galaxy Note has done.
Lee Seung-woo, senior analyst at Shinyoung Securities, said, ¡°Samsung Electronics¡¯ handset shipments are forecast to rise more than market expectations in the second quarter, but there is a variable ¡Æ¢â the upcoming release of the iPhone 5, slated for the third quarter.¡±
Samsung Electronics will likely see its semiconductor business turn in flat performances as NAND flash memory prices remain stable and DRAM prices go up. The company is set to mass-produce the application-specific integrated circuit (ASIC) system LSI (large scale integration) starting from the second quarter.
Prospects for display and TV businesses are not bad. Song Jong-ho, a researcher at Daewoo Securities, said, ¡°Apple¡¯s release of smart TVs in the third quarter will create a sensation, as its smartphones do.¡± He predicted that Samsung Electronics, which has already gotten a jumpstart in the smart TV segment, will likely see its smart TV set sales rise and its display segment follow suit.
Word has spread that Samsung Electronics is forecast to post 200 trillion won in sales and 25 trillion won in operating profit, joining the ¡°200-25 Club.¡± Suh Won-seok, an analyst at Korea Investment & Securities, said the conventional consensus on Samsung Electronics¡¯ registering 199 trillion won in sales and 23.6 trillion won in operating profit will need to be revised.
Ordinary companies tend to boost investments at booming times but reduce them during hard times. Samsung Electronics has made up-front investments to retain its competitive edge, however. Statistics on the Korean electronics maker will testify to this fact. Samsung Electronics¡¯ business reports showed that the company invested a combined 98 trillion won over the past four years. The figure represents 40.8 percent of the 228.34 trillion won that the top 25 Korean companies, each posting more than 10 trillion won in annual sales, except financial companies, have invested in total for the past four years. Samsung Electronics has Korea¡¯s highest investment rate versus sales at 16.1 percent among the top 10 large-scale companies.
Samsung Electronics¡¯ investments are on rise. The company poured investments ranging from 15 trillion won to 21 trillion won yearly during the period between 2007 and 2009, then they jumped to 31 trillion won in 2010 and 33 trillion won in 2011, when the national and global economies suffered hardships. The company plans to invest a record high 38 trillion during this year ¡Æ¢â 25 trillion won in facility investments and R&D costs equivalent to 8 to 9 percent of its sales.

The Galaxy Note fetches 999,000 won in Korea, becoming the highest priced among its premium products. It yields an estimated 30 percent in operating profits.
Sources in the Korean securities market say Samsung Electronics sold more than 3 million units of the Galaxy Note during the first quarter of the year, earning more than 1 trillion won in operating profit. The Galaxy S2 also made a strong showing in the first quarter with between 44 million and 45 million units sold.
Park Young-ju, an analyst at Woori Investment & Securities, said, ¡°Samsung Electronics¡¯ mobile communications business accounted for about two-thirds of the combined first quarter operating profits, particularly 3.8 trillion won from the cellular phone segment.¡±
The Galaxy Note was unveiled to the public for the first time at the International Electronics Fair (IFA) 2011 in Berlin in September. It grabbed worldwide attention even before its release due to its revolutionary functions and ease of use.
The Galaxy Note is a new type of personal information device, combining the strong points of smartphones and tablets.
It is fitted the world¡¯s first 5.3-inch WXGA (1280x800) High-Definition Super AMOLED, the largest screen with smartphone portability, which provides an expansive high-resolution screen for an immersive viewing experience and allows the user to see more and do more while on the go. Samsung Electronics officials said by fully taking advantage of the 5.3-inch screen, users will be able to view more in one glance with minimum scrolling and screen transitions.
The device operates on the Android 2.3 Gingerbread mobile operating system, weighs 182 grams and is 9.65 millimeters thick.
The Galaxy Note provides users with the ability to freely capture and create ideas anywhere and at anytime. The S Pen is combined with the full touch screen to create a best-in-class mobile input experience. It is the most advanced pen input technology featuring an array of functions including pressure sensitivity, preciseness, speed, and more. With the S Pen, users can easily sketch drawings or write notes with increased accuracy and ease. Also, the S Pen¡¯s functionality is deeply integrated into the Galaxy Note¡¯s native applications to provide a rich, interactive experience.
The S Memo function lets users record all forms of ideas instantly and freely. A quick memo can be taken from any screen to capture an idea before it floats away. Those ideas along with pictures, voice recordings, typed text, handwritten notes, or drawings can be captured with the S Memo, to be edited, annotated, and shared as desired. Photos and videos can be easily personalized using the advanced S Pen. Users can scribble in personalized notes and drawings or their memories of precious moments such as family outings, a baby¡¯s first steps, and many more.
The S Planner provides the tools to manage complicated schedules in an easy and intuitive way.
The Galaxy Note has a powerful camera feature with an advanced 8-megapixel camera as well as a 2500mAh battery, enabling the users to prolong their Galaxy Note experience and enjoy all the features it provides.
It allows the user to experience unrivaled applications powered by a lightning fast network speed (HSPA+ up to 21Mbps or 4G LTE) and 1.4GHz dual core processor, Samsung officials said.

A model displays the Galaxy Note Pink that made its debut in late 2011. The Galaxy Note has led the list of the factors to post Samsung Electronics' brilliant Q1 earnings.

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