Stifel Nicolaus equity research analysts Aaron C. Rakers, Joseph Quatrochi and Andrew Shinn highlight Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s earnings.
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) reported its December quarter results, from which we highlight the following takeaways:
Samsung smartphone growth potential via China LTE ramp
The company is focused on continuing to expand its flagship high-end smartphone model line-up going forward. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) reported that its smartphone shipments declined sequentially during 4Q13 due to inventory adjustments and increased competition (mainly Apple iPhone). The company is focused on actively addressing the 4G LTE demand in China and Europe. The company expects to grow its tablet business above market growth rates going forward while also expanding profitability and product offerings – including a new large screen category. While Samsung is expecting smartphone and tablet demand to be seasonally down in the March 2014 quarter, the company notes that it is focused on outperforming with sales increasing on a sequential basis as the company launches new models such as Galaxy Trend II, as well as new Galaxy Note Pro and Galaxy Tab Pro tablets. Samsung is expecting its smartphone shipments to increase in a mid-single digit sequential range during C1Q14, while tablet shipments are expected to increase in the low single-digit range.
Samsung’s total mobile phone shipments
The company reported that its smartphone shipments declined slightly in the December 2013 quarter. Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930)’s expectation of 15% yr/yr smartphone growth in 2014 is expected to be driven by China and Europe, as well as continued growth in emerging markets. An interesting data point offered by Samsung is the estimate that the China 4G LTE market opportunity in 2014 is estimated to be approximately 70 million; though the company believes this could prove conservative and dependent on licensing. Samsung reported its total IT & Mobile Communications operating margin at 16.1%, down from 18.3% in the prior quarter and versus 17.8% in the year- ago quarters.
Samsung’s memory (DRAM & NAND) market
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) expects ongoing disciplined supply / demand balance in the memory market, though reporting that it will continue to focus on expanding its migration to new technologies (e.g., 3D NAND). Samsung reported that it saw seasonal strength in the PC DRAM market during the December quarter, while also seeing incremental demand from the game console cycle. Total DRAM shipments increased 10% sequentially in the quarter with price increases reported in the low-single digit sequential range. The market for SSDs continued to increase, driven by high-end PCs and reflecting stable demand trends in enterprise. Samsung did report that NAND content in the high-end smartphone market was a bit lower than expected in the quarter. Samsung remains focused on expanding its 10nm process, while also remaining focused on its efforts in 3D V-NAND. Samsung noted that it has sent out sample shipments of enterprise SSDs based on the company’s V-NAND offerings and customers are currently going through the qualification process, which it believes is progressing smoothly. SanDisk has retained its expectation that 3D V-NAND would commence production in late-C2015 followed by a production volume ramp in C2016. Samsung expects 2014 to reflect ongoing growth in the overall memory market due to demand in the enterprise data center, led by cloud expansion. This demand is expected to lessen the seasonal decline in the March 2014 quarter. Samsung expects bit growth for DRAM and NAND to be in the mid-20% and mid-30% range in 2014, respectively.
Flexible display panels
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) expects to introduce upgraded flexible panels from its display business in 2014. Samsung expects competition in OLED Panels to increase given increased competition in the high-end smartphone market (e.g., Sharp, Japan Display, and LG Display). Samsung estimates that total industry tablet panel sales grew 10% sequentially during 4Q13. Samsung expects a seasonal Panel demand in the March 2014 quarter. LG Display had guided to a seasonal decline in C1Q14, despite the potential benefit from Apple Inc. (NASDAQ:AAPL)’s ramp at China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941).
Samsung’s expectation for for global recovery
Samsung Electronics Co., Ltd. (LON:BC94) (KRX:005930) expects the global recovery to be led by U.S. and Europe, while increased FX fluctuations in emerging markets are expected to continue.
