Samsung Electronics Co. (KRX:005935) is expected to report better-than-expected earnings in the second quarter of this year as shipments of the company’s latest Galaxy S5 are estimated to reach 35 million units in the three-month period ending in June.
According to a report from The Korea Times on Tuesday, industry analysts and fund managers are impressed by the initial sales of the Galaxy S5, which could also reduce investors' concerns about profit margins in the company’s mobile phone business. Following the release of the Galaxy S5 last week, Samsung announced that the new smartphone enjoyed strong sales on the first day of launch, selling 1.3 times more units than the Galaxy S4 did on its debut.
“Against earlier expectations, the S5 was well-received by consumers in the global market. We don’t have any plans to advise our big clients to unload their Samsung stock,” a senior fund manager from a U.S.-based investment bank in Seoul told The Korea Times.
The South Korean technology giant launched the Galaxy S5 in 125 countries and signed contracts with the top five network providers in the U.S., including Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), T-Mobile US Inc (NYSE:TMUS), Sprint and United States Cellular Corporation (NYSE:USM).
According to insider sources, Samsung aims to ship at least 35 million units of the Galaxy S5 in the second quarter of this year, generating about 17 trillion won ($16.4 billion) in quarterly revenues from sales of its newest device.
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“Samsung’s smartphone business has been faring well since the introduction of the first Galaxy mobile phone. The S5 will be a major turning point for Samsung’s mobile business. That’s why Shin Jong-kyun, the company’s mobile chief himself, checks sales figures and stock movements,” a senior Samsung executive told The Korea Times.
Galaxy S5 Bill Of Materials: Display Is The Costliest Component
Meanwhile, market research firm IHS said, based on a teardown analysis of the Galaxy S5, that the 32GB version of the smartphone's bill of materials adds up to $251.52, which means that the phone costs $256.52 to produce after a $5 manufacturing cost is added.
This means the Galaxy S5 is more expensive than other high-end smartphones, such as the 32GB iPhone 5s, which cost $207 to build. The Galaxy S5’s display was found to be the costliest at $63, followed by the memory chips, which are supplied by Samsung itself and cost $33 in total, Re/code reported. Samsung makes a profit of more than 60 percent on each unit of the phone, which retails for about $660, SamMobile reported.
The analysis also revealed that the Galaxy S5’s modified components include the Qualcomm WTR1625 RF transceiver, a new version of the NXP NFC controller and the ES704 noise suppression device from Audience Inc (NASDAQ:ADNC). In addition, the Galaxy S5 also features the PMC8974 power management chip from Qualcomm Inc (NASDAQ:QCOM), a component, which IHS said, it had never seen in an electronic design.