SEOUL Samsung Electronics Co Ltd (005930.KS) expects record shipments for its new Galaxy S6 smartphones and said it will struggle to meet demand for the curved-edged version due to production constraints, adding to hopes for a turnaround in mobile sales.
The S6 models are widely expected to sell briskly following a string of positive reviews, boosting prospects for an earnings recovery in 2015. This week, the company estimated its January-March operating profit to be its highest in three quarters, which analysts said was partly because Samsung put its own chips in the new phones.
Samsung expects the flat screen S6 to sell more than the higher-margin S6 edge - priced about $120 more in South Korea - but mobile chief J.K. Shin said at a media event on Thursday the firm won't be able to keep up with demand for the latter model in the near term because the curved screens are harder to manufacture.
"Some carriers are switching existing orders to get more of the S6 edge, and it looks like demand for the model will exceed supply throughout this year," said HMC Investment analyst Greg Roh. "That means average selling price will fall at a slower rate, which will have a positive impact on Samsung overall."
Samsung has not disclosed its shipment record for the handset. Analysts regard the Galaxy S3 as its best-selling model overall, though they estimate the Galaxy S4 to have done better in its initial year, when a model is most profitable.
Nomura estimated that Samsung sold 80 million S3s in three years from its 2012 launch, and 43 million S4s from the model's April 2013 launch to the end of that year. Some analysts say Samsung could ship 50 million or more S6 phones this year.
Samsung's Shin also said the South Korean electronics maker is preparing a variety of wearable devices, including a new version of its Gear smartwatch, but did not give specifics. Arch-rival Apple Inc (AAPL.O) is due to roll out its much-anticipated smartwatch on April 24.
QUALCOMM STILL A PARTNER
Shin acknowledged that Samsung opted for its own mobile processor and modem chip in the Galaxy S6 instead of equivalents from U.S.-based Qualcomm Inc (QCOM.O).
Samsung previously relied heavily on Qualcomm chips for its flagship phones, but recent reports based on dismantling Samsung's handsets showed the firm replaced many Qualcomm chips with its own. Shin said the companies remain close partners.
"We have to use the best engines to make our products competitive, which is why we opted to use our own chips," Shin said. "But we may very well end up using products from Qualcomm again in the next Galaxy phone."
The new Galaxy devices go on sale in 20 countries on Friday.
(Additional reporting by Sohee Kim; Editing by Tony Munroe, Edwina Gibbs and Christopher Cushing)