Samsung is set to become the most profitable non-financial company in the world.
What is especially impressive about the recent news out of Samsung is the background. The Note 7 debacle would have been enough to sink most companies. Having your boss arrested, and being embroiled in a scandal that claimed the scalp of South Korea’s President is not normally considered to be good for you, either.
And yet the company’s estimated profit for the April to June period is 14 trillion Korean Won, or around US $12 billion.
Apple’s projected profit for Q2 are just US $10.5 billion.
Apple has a market cap of $747 billion – it’s the biggest company in the world. Samsung’s market cap is around $300 billion.
Why is Apple worth so much more?
Well, one advantage that Apple has over Samsung is that its phones are not Android, meaning it generates more revenue from its apps. Apple is generating more revenue from services and more repeat revenue.
Samsung is more reliant on the smart phone upgrade cycle, a cycle that may become more elongated.
On the other hand, Samsung has its chips. In its Q2, sales from its semiconductor division are thought to have been around $15.1 billion – that compares with $14.4 billion thought to have been generated by Intel. It is now the biggest chip maker in the world.
We live in age of accelerating technology, meaning accelerating potential for disruption.
Samsung may have scored over Apple in Q2 of this year, but the markets seem to be telling us that Apple has a better plan for dealing with disruptive technology.
The chip business is set to be disrupted too – as Moore’s Law comes to an end. We are set to enter a period when the market will demand more specialist chips, which focus on specific tasks. Beyond that, we have the potential for graphene chips and quantum computers.
Can Samsung continue to successfully compete with the world's biggest companies?
They way it has dealt with the Note 7 and political scandal is impressive, don’t write it off.