Apple Inc. (AAPL) is likely to be eclipsed by its global nemesis, Korea-based Samsung Electronics Co. Ltd. (SSNLF), in terms of profitability, the Wall Street Journal reports. Samsung expects to report operating profits of $12.1 billion, when converted into U.S. currency, for the quarter that ended in June. This would represent a 72% increase from the same quarter in 2016, the Journal says.
Meanwhile, analysts estimate that Apple will report operating profits of $10.6 billion for its most recent quarter, according to S&P Global Market Intelligence, as cited by the Journal. Apple is due to issue its earnings release in early August. This would be the first time that Samsung would beat Apple in quarterly profits, according to CNBC.
About 60% of Samsung's operating profits come from sales of memory chips, per research from Morgan Stanley (MS) referenced by the Journal. Meanwhile, as a result of strong demand, prices of this increasingly important industrial commodity are rising, the Journal adds. Interestingly, about 5% of Samsung's operating profit comes from memory chips sold to Apple, per research by Credit Suisse Group AG (CS) cited by the Journal.
Samsung is the global leader in semiconductor sales, and its operating profit from this division for the second quarter is expected to be nearly 91% of its full year profit in 2014 from this same product line, according to an Associated Press report in USA Today. Moreover, per the same report, Samsung has advanced memory chip production technology that is years ahead of rivals. (For related reading, see: Samsung Poised to Surpass Intel in Second Quarter.)
In addition to semiconductors, Samsung is a major global force in a variety of industrial and consumer electronic products, most notably televisions and smartphones.
Top Seller of Smartphones
Since 2011, Samsung has been the global leader in the number of smartphones sold, according to Statista.com. In 2016, Samsung's Galaxy series of smartphones enjoyed sales of nearly 45% more units than Apple's iPhone, per the same source.
While Apple's iPhone sales have lagged recently, Samsung's new Galaxy S8 appears to be selling very well, according to the Journal and TheStreet.com. Consumers seem to have shrugged off last year's disastrous introduction of the Galaxy Note 7, which was prone to catch fire from overheating batteries. It was banned from all U.S. airlines, then recalled completely in October 2016, just two months after its debut. (For more, see also: Samsung Has Another Galaxy S8 Problem.)
Samsung also stands to profit should Apple's new iPhone 8, scheduled to roll out later this year, enjoy strong sales. The reason: Samsung is expected to supply cutting-edge organic light-emitting diode (OLED) displays for the upcoming iPhone 8. These are described as "bendy, next-generation screens," per a report from Reuters, and the AP indicates that Samsung has a market share of 90% for these components.
Shares of Apple are up 25.5% for the year-to-date through July 7, and 84.4% for the five years ending that date. Samsung is listed on Nasdaq under the symbol SSNLF, but trading volume is tiny and sporadic, and the price often remains unchanged for weeks, per Nasdaq data. With that caveat, over these same time periods Nasdaq price quotes for Samsung stock were up 66.4% and 108.0%, respectively.
In trading on the Korea Stock Exchange denominated in the South Korean won, shares of Samsung have risen 33.8% for year-to-date 2017 and 112.5% over five years, according to data from Reuters. The spot price of the won has appreciated by 4.5% in 2017, per Bloomberg Markets data, meaning that the price of Samsung shares traded in Seoul have gained 39.8% (1.338 x 1.045 = 1.398) in dollar terms so far this year. Over the last five years, the dollar value of the won is virtually unchanged.