Why Samsung leads the Smartphone race ahead of Apple

The first half of 2017 saw Samsung, the world’s largest maker of smartphones, report record breaking quarterly earnings and leapfrog Apple in terms of profits. This is some momentum they will be hoping to sustain, even as Apple prepares to release the 10th-anniverssary of their flagship phones, iPhone 8.

One of the major pillars that Samsung intends to rely on to boost this gap is the well-received Galaxy S8 smartphone. Samsung launched the Galaxy S8 at the right; when its reputation needed repair. The S8 made Samsung regain ground lost to Apple and Chinese rivals following the Note7 debacle last year.

However, Samsung does not only depend on the production of smartphones to extend the gap on Apple. The company is also among the world’s largest manufacturer of memory chips and other vital parts of a phone such as OLED displays, which may soon become the standard display panels.

In a report that was released on Friday 7th, it is evident that Samsung is reaping big from the high prices of memory chips used in various gadgets. “Samsung’s dominance in components that matter gives it the upper hand at least through the entire next year,” said Lee Jae-Yun, an analyst at Yuanta Securities Korea. “There is only so much either Apple or Samsung can do right now to make their Smartphone’s stand out, unless technology like foldable displays reshapes the market.”

Though Samsung did not release its net income or break out divisional performance until the final results are released late this month, it can be said that the sale of memory chips brought almost double the sale of mobile devices. The figures were reported to be 7.5 trillion in chips, 3.8 trillion in mobile devices, and 1.5 trillion in displays. These results include the first full quarter of sales from the bezel-less Galaxy S8.

“Samsung’s been successful with cutting manufacturing costs for memory chips, and that’s been a big factor, while display sales helped to boost the earnings,” said Greg Roh, an analyst at HMC Investment Securities.

“Chip prices will keep rising, and another record of operating profit is in sight for Samsung in the third quarter.”

“The company is on track to earn about 15.2 trillion won in the third quarter on the back of Galaxy S8 sales, with an annual profit of 54 trillion won this year,” Roh said.

With the current trend, Samsung may soon displace Intel as the World’s biggest chipmaker regarding sales this year, if they manage to maintain the current momentum. Chung Chang-won, who is an analyst at Nomura holdings, further added that “despite its tussle with Apple, it will continue to reap the benefits of being a major supplier to Cupertino as devices get smarter. Sleeping with the enemy would be the way to define their relationship going forward. You can’t do AI without memory, and Samsung has the memory to sell.”

It will be interesting to see how the market will respond to Samsung’s Galaxy 8 after the release of iPhone. One thing, however, is for sure, if Samsung’s sales for chips and OLED displays continue to grow alongside their trademark phones; they will surely have beaten Apple in this unending race, at least in the meanwhile.

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