Samsung to post record Q2 profit of W6.7 trillion

Mobile business continues to contribute to growth, analysts say


Samsung Electronics, the world’s biggest chip and smartphone maker, is expected to post record earnings in the second quarter of this year.

The company estimated that its operating profit will reach about 6.7 trillion won ($5.9 billion) in the months between April and June, up about 79 percent from 3.75 trillion won a year ago. It is likely to post sales of approximately 47 trillion won, up 19 percent from 39.4 trillion won, according to the company’s pre-earnings guidance disclosed through a regulatory filing. The company did not issue its net profit estimation, or explanations for the figures.

The tech giant, however, indicated during its first quarter results announcement that “solid earnings are to continue due to demand increase for set products and improved demand/supply conditions for the components (such as chips) amid seasonal pick-up.”

It noted then that demand will grow for smartphones, as well as for TV and digital appliances especially in emerging markets.

Although its second quarter sales performed below market expectations, Samsung Electronics’ operating profit outperformed the general consensus of 6.67 trillion won by analysts. The market consensus for sales was 49.97 trillion won, according to FnGuide, a financial information provider.

Analysts revised down their initial forecast of above 7 trillion won in operating profit early this month due to macroeconomic factors such as slowdowns in Europe, the U.S. and China.

They said that Samsung’s IT and mobile communications unit will continue to be the major contributor to growth going forward as it did in the first quarter

“Samsung smartphones will take the lead in the global high-end mobile phone markets, which are expected to boost to its second quarter earnings,” said Kim Young-chan, an analyst at Shinhan Investment.

Its new flagship Galaxy S3 has a competitive advantage in the markets as Samsung’s close rival Apple delayed the release of its new smartphone.

The analyst expects Samsung’s Galaxy S3 to hit global sales of over 6 million phones in the second quarter, and 25 million in the second half of this year.

The company’s IT and mobile communications division had an operating profit of 4.27 trillion won in the first quarter, and it is estimated to slightly increase to 4.3 trillion won in the second quarter, he noted.

Samsung Electronics said that it will actively market both the Galaxy S3 and Galaxy Note Long Term Evolution smartphones in the second half in line with the 2012 London Olympics in which the tech giant is one of official sponsors.

In June, the company sold 650,000 Galaxy S3 smartphones, according to a press release.

Samsung Electronics smartphones accounted for a dominant 66 percent of domestic market shares in the first half of this year.

By Park Hyong-ki (hkp@heraldm.com)

DUP to narrow presidential primary race to five candidates

The Democratic United Party will cut the candidates with the lowest scores in surveys later this month, ahead of the presidential primaries scheduled to be held in September.

According to the DUP’s presidential election preparation committee Friday, the party will survey party members and the public on July 29 and 30, and the top five candidates will be allowed to run in the primaries.

At present, five DUP lawmakers ― Moon Jae-in, Sohn Hak-kyu, Chung Se-kyun, Kim Yong-hwan and Choi Kyung-tae ― have officially announced that they will be running for the presidency.

South Gyeongsang Province Governor Kim Doo-kwan is scheduled to announce his candidacy on Sunday. In addition, South Jeolla Province Governor Park Jun-yeong and former presidential candidate Chung Dong-young have been named as possible candidates, setting the number of potential DUP presidential hopefuls at eight.

According to the preparation committee’s plans, the survey will give 70 percent weight to party members, and the remaining 30 percent will be given to the public’s responses.

“As ballots for those who were removed in the cut-off are dead votes, it was decided to conduct the cut-off before the open primaries,” a DUP official told the local media. He added that allocating a longer period for forming the electoral body is beneficial to the primaries. The DUP was originally expected to cut off candidates with the smallest support base within the party in August.

With the party deciding to cut off candidates earlier than planned, the DUP will close candidate registration on July 22, and finalize rules for the primaries before July 25.

As for the primaries, the DUP will begin going around the country to hold elections on August 25 in Jeju, and the final candidate is expected to be selected in late September.

Party representatives will cast their votes on site, while ordinary party members and members of the public will be able to choose between onsite and mobile voting.

By Choi He-suk (cheesuk@heraldm.com)

S. Korea, Bolivia set up joint lithium development venture

South Korea's state-run mineral development corporation set up a joint venture with its Bolivian counterpart to develop lithium in the South American country, sources said Friday.

Seoul's embassy in La Paz said a consortium made up of Korea Resources Corp. (KORES) and POSCO, South Korea's leading steelmaker, signed a deal to create a lithium venture with Comibol, Bolivia's mineral development corporation.

Under the agreement reached Thursday, the new company will make anodes and cathodes for electric vehicles that will run on rechargeable batteries made from lithium found in Bolivia.

The country's lithium deposit is estimated to stand at around 5.4 million tons, or half of all known reserves in the world.

Comibol is to provide the lithium, nickel and manganese needed to make batteries, and the Korean consortium plans to offer manufacturing knowhow.

The tie-up is expected to be a win-win arrangement, because Bolivia can learn the manufacturing process from its South Korean partners, while Seoul can gain access to the critical natural resource that is used in mobile phones, notebook computers and batteries for electric vehicles.

South Korea, which is the largest manufacturer of lithium rechargeable batteries, imports 12,000 tons of lithium from countries such as Chile and Argentina.

(Yonhap News)

The gentleman’s syndrome

A look into the real-life 40-something man-about-town


In the much-talked-about, much-watched “A Gentleman’s Dignity,” men are portrayed as skincare-conscious 40-something dudes who hang out at cafes and are not afraid to gush over their non-alcoholic beverages or be seen shopping together.

With viewer ratings up in the 20 percent range, this oft-called male version of “Sex and the City” is a hot commodity, but are the attractive, sensitive, metrosexual leading men in the show a far-fetched image of middle-aged male society or for real?

“I think that ‘A Gentleman’s Dignity’ does reflect societal trends, to a certain extent,” said men’s magazine Leon Korea editor-in-chief Sheen Dong-sun.

In the hit SBS drama “A Gentleman’s Dignity,” the four male leads — played by (from left) Lee Jong-hyeok, Jang Dong-gun, Kim Su-ro and Kim Min-jong — are portrayed as trendy, well-groomed 40-somethings who hangout at cafes and shop together. Are the characters a reflection of middle-aged Korean men today? (Hwa and Dam Pictures)

“Men really do chat,” said Sheen, 41. “Now, instead of moving onto drinks after dinner, guys are going out for coffee, where they sit down, chat and then call it a day.”

“Since we first opened in South Korea in 1999, there has been a rise in the number of men who use our cafes as a gathering spot,” said a Starbucks Korea representative who observed that male cafe-goers are still outnumbered by female customers.

As for the skincare products that the male leads, namely Lee Jeong-rok (Lee Jong-hyeok), are seen using in the program, Sheen said that there has been a noticeable increase in interest in beauty products and services among men in their 30s and 40s.

Considering the explosion in diversity and variety of men’s skincare products in the Korean cosmetics market, it is not hard to believe that men are increasingly more invested in taking care of their complexion.

Take Amore Pacific for instance. The Korean company launched its “prestige” men’s cosmetics brand, Hera Homme, in 2005.

Hera Homme then went on to release its first blemish balm (a sort-of multi-purpose tinted moisturizer) in 2010 and just released a three-step skin tone-focused “cell brightening” line this month.

Blemish balm is nothing new to the world of men’s cosmetics. Media coverage of the tinted moisturizer and its more extreme cousins has been extensive, but if anything has changed over the years, it looks like the blemish balm-wearing age group might be getting broader.

“The consumer range that buys blemish balm is growing,” Hera Homme PR specialist Park Sung-min said. “In the past, young men were the primary consumers, but now many office workers also purchase the balm.”

“The age bracket for blemish balm seems to extend up to men in their early 30s but not further than that,” said Leon Korea marketing manager Oh Min-soo.

Park, however, said she heard some men in their 40s ― the age group portrayed in “A Gentleman’s Dignity” ― also seek out blemish balm.

“Those in their early-to-mid-40s, an age bracket now-dubbed the ‘blossom of middle age,’ are showing growing interest in personal upkeep,” Park said, adding that their premium Black line attracts that age group and that the average Hera Homme customer is aged 30 to 39.

According to new reports, the men’s cosmetics market has been showing an annual growth rate of over 15 percent. This year, it is predicted the market will reach the one trillion won ($881 million) mark.

When it comes to makeup though, it looks like blemish balm is about as far as the average Joe will go.

At Boboris Salon and Spa in Seoul, one of the most popular grooming-related services amongst male clientele is the manicure. According to creative director Esther Kim, men generally receive a simple cuticle-and-nail length-based treatment to make nails look clean and neat. (Lee Sang-sub/The Korea Herald)

“I just do not think the trend really goes beyond blemish balm,” said Boboris Salon and Spa director Song Si-hoo.

If blemish balm stands out as the mascot of the men’s makeup sector, the male skincare market itself seems to be growing in the spa treatment sector, leading to the catchphrase “grooming tribe.”

Men are getting facials, manicures and having their eyebrows waxed.

“These days there is a trend amongst men toward doing eyebrow waxing,” said Boboris Salon and Spa creative director Esther Kim.

Song, however, stressed that it is more common amongst young men.

Boboris, which opened in Seoul this February, offers skincare, nail care and brow waxing services for men.

“Out of the three, manicures are the most popular,” said Kim, 38, who explained that men get a simple manicure to make their nails look clean and neat. “They get their cuticles and nail length taken care of.”

“There are quite a few men who get manicures,” said Leon Korea’s Oh, 38, who added that when men go to get their hair cut, the salon might recommend it as an additional service, and then it just becomes part of the whole grooming package.

“Facials are our second most popular spa treatment for men,” said Boboris’ Song. Many men opt for pore tightening and acne-zapping treatments.

Men in their late 20s to mid-40s form Boboris’ main male clientele, a sign that, indeed, intensive grooming is not necessarily restricted to young trendsetters.

The new salon created a separate floor for VIP clients and men because “men these days are very interested in fashion and hair” and need a trendy spot to meet their needs, said Song.

Both the recent opening of Boboris and the launching of the first Korean edition of the Japanese men’s magazine Leon this March signal a growing target segment of middle-aged men who are into trends, lifestyle and fashion.

While the Korean men’s magazine market is over a decade old and already sports a slew of publications like the Korean editions of Esquire, GQ, Arena and Maxim, it looks there is still room for a new magazine that targets middle-aged male readers.

“In the past, men in their 30s were too busy making a living but we noticed that that has now changed,” said Sheen.

Leon Korea’s main readers are men in their 30s and 40s, said Oh.

“They are Generation X,” Oh added, describing the generation’s males as guys who spent their youth in the 90s, when K-pop was blossoming and it was cool to pierce your ears, dress in fashionable hip-hop attire and drive a flashy car.

“Those guys are now in their 40s and they are not scared to dress up,” he said.

Generation X, then, is the same generation that the male leads of “A Gentleman’s Dignity” hail from in their fictional world, a world whose men are fashionable and chic.

In this world of make-believe, the male characters, save for Lee Jeong-rok, are single, and two, including Jang Dong-gun’s Kim Do-jin, have never been married. Just how accurate a portrayal is this of that age group?

According to a survey by Statistics Korea, the percentage of single men in their early 40s went up from 2.6 percent in 1995 to 14.8 percent in 2010, an indication that “A Gentleman’s Dignity” is not too far off the mark in that department.

Some aspects of the drama, though, in Oh’s opinion are not reflective of actual societal trends.

“The mart scene seems exaggerated,” Oh said referring to the scene where the four male characters go shopping together.

Sheen added that while men do shop alone these days, she does not think that men tend to shop together.

“That is not a widespread trend,” Sheen said.

Oh is also careful not to give the impression that the average 40-something man is a mirror image of one of the characters out of “A Gentleman’s Dignity.”

The main male characters, said Oh, are around his age.

“I can relate to that. I can see that around me, but outside my industry, it is harder to see that among my middle-aged friends.”

By Jean Oh (oh_jean@heraldm.com)

E-Land's China operation to be listed on Hong Kong exchange

E-Land's China operation to be listed on Hong Kong exchange

Korean retailer E-Land Group said Thursday that it plans to list its Chinese affiliate on the Hong Kong stock exchange so it can expand its presence in the fast growing market. The plan calls for making an initial public offering (IPO) of E-Land Fashion China Holdings Ltd. and listing the company by the end of 2013, it said. E-Land Fashion is a major player in women's clothing in China, and is 100 percent owned by the parent company. "Proposals for the listing have been sent to global investment banks with a managing firm to be selected to take charge of the IPO within the month," the company said. Listing the company could allow it to directly generate funds to strengthen its market presence in the emerging economy. It can also improve the financial status of the E-Land China affiliate. E-Land said it expects the listing could generate $1 billion worth of fresh funds. (Yonhap)

Investigation may touch on President's campaign funds

Investigation may touch on President's campaign funds

By Na Jeong-ju The prosecution will summon a ruling party lawmaker who worked as a key campaigner for President Lee Myung-bak during the 2007 presidential race for questioning Thursday as part of a widening investigation into a corruption scandal involving savings banks. The summons for Chung Doo-un, a three-term lawmaker of the Saenuri Party, comes after Lee’s elder brother and former National Assembly vice speaker, Lee Sang-deuk, was quizzed over bribery allegations. The elder Lee faces suspicions that he received at least 600 million won ($525,000) from Lim Suk, chairman of Solomon Savings Bank, on several occasions from 2007 to 2010. Rep. Chung is known to have arranged the first meeting between the elder Lee and Lim after President Lee declared his presidential bid in the summer of 2007. “Lim told us that Chung was there when he gave money to Lee Sang-deuk,” a prosecutor told reporters. “Chung himself is also suspected of having taken money from the chairman just ahead of the presidential election.” The remarks suggest that the money from Solomon was part of campaign funds, which were managed by the elder Lee, a former six-term lawmaker. Chung became estranged from the Lee family after he openly criticized the elder Lee and his aides in 2008 for meddling in the selection of people for high-ranking positions at the administration and state-run firms as well as ruling party candidates for elections. The questioning of Chung is expected to focus on how Lee’s campaign team collected and used campaign funds. On Wednesday, prosecutors told reporters that they have secured clues suggesting that Kim Hak-in, former chairman of the Korea Broadcasting Art School, might have provided 200 million won to the elder Lee ahead of the election. Kim is now on trial on separate bribery charges. Kim told investigators that he first met the elder Lee through Chung. According to the prosecution, Lim, the Solomon chairman, also said he provided illegal political funds to Rep. Park Jie-won, the floor leader of the main opposition Democratic United Party. After interrogating Chung, the prosecution will issue a summons for Park as well, to clear the bribery suspicion, investigators said. Solomon is among several troubled lenders that reportedly bribed a number of politicians and government officials to avoid audits and crackdowns under the Lee administration. Lim told prosecutors that he gave money to the elder Lee, but it was not in return for his assistance. The elder Lee was sent home early Wednesday morning following a 16-hour-long interrogation. Besides the money from Solomon, he was questioned about the nature of the 150 million won he took from Kolon Group and the 700 million won found early this year in a bank account that belonged to one of his aides. The prosecution plans to request a court warrant as early as this week to take him into custody for further questioning, prosecutors said.

jj@koreatimes.co.kr

Raise minimum wage

Raise minimum wage

People who work full time shouldn’t incur debt A trilateral panel of government, labor and management has set next year’s minimum wage at 4,860 won ($4.2) an hour. This is not enough to buy a bowl of cold noodles, or even a Big Mac set, including a coke and French fries. Yet business associations complain that the annual increase rate of 6.1 percent is too high, ignoring the economic situation. And representatives of labor circles boycotted final voting this year, too, to express their anger about the low wage floor and the one-sided selection of public-sector members of the Minimum Wage Council. It is long past time the nation rectified both the rock-bottom wage level and the ways it is fixed every year. The 2013 minimum wage is equivalent to a monthly salary of 1.01 million won based on a 40-hour workweek. Employers stress that the amount has finally broken the 1 million-won landmark. But it falls far short of the average living cost of 1.4 million won for a single-member household. In 2010, Korea’s consumer price-adjusted wage floor of $3.06 stood at only 30 percent of France’s ($10.86) and 38 percent of Japan’s ($8.16), according to the Korea Labor Institute. The nation’s minimum wage accounts for only 37 percent of its average wage, making it the only one with the rate below 40 percent among countries whose per capita gross national income exceeds $20,000. No less problematic is the way the minimum wage is decided yearly, in which both labor and management make proposals that show unrealistically wide gaps between each other’s expectations, and public-sector members of the trilateral council then mediate among them. In most cases, either employers or employees walk out of the vote depending on which side the mediated plan comes closer to. This outdated method has long outlived its usefulness, exacerbating only the already fragile industrial peace. Equally outdated is the management’s argument that minimum wage hikes are a job killer. True, an abrupt rise in the wage floor might wrinkle the bottom lines of businesses, particularly small- and medium-sized enterprises, forcing them to cut down on their payrolls somewhat. But most studies, here and abroad, show that minimum wage rises show far smaller effects than expected on corporate balance sheets. In the case of Korean SMEs, the biggest reason was demands from large businesses to slash supply prices. Taking various situations at home and abroad, calls from the labor to introduce a statutory minimum wage, for instance to 50 percent of the average wage plus the annual inflation rate, seem reasonable. The government should help by cushioning the impact of a rise in the minimum wage, providing basic life assistance for the newly unemployed as well as job training. The minimum wage should be what it literally means ― guaranteeing a basic living for workers. Those who work full time should be able to maintain minimal living standards without incurring debt. That is simply impossible in Korea now.

Capitalism or feudalism?

07-03-2012 17:21 Capitalism or feudalism?

Time to ponder how to rectify chaebol system The Fair Trade Commission released a chart Monday, which illustrates the shareholding structure of 63 family-controlled conglomerates and their subsidiaries. The diagram, which appears even more complicated than the Seoul subway map, drew attention to two things: how these families dominate huge corporate empires with limited equity, and whether and how long Korea should let the chaebol system continue as it is. According to the antitrust agency, the equity share of chaebol owners has dropped below 1 percent for the first time, but the ``intra-family” equity ― those held by family members, relatives, affiliated firms and board members ― rose to 55.7 percent, the highest level in the past two decades. What this signifies is simple: the efforts of successive governments, except probably the current one, to rein in chaebol’s economic power succeeded outwardly but failed inwardly, because their industrial might has grown even stronger than before the 1997-98 financial crisis. Elections or not, it is long past time for the nation to seriously think about whether it should continue to leave the entire economy in the hands of a few dozen families and their vassals. People who support the chaebol system, including bureaucrats and economists, say the conglomerates and their owners are only victims of their hard-won success. They also cite the swift and bold decision-making process as the decisive advantages over foreign competitors who have to watch the faces of investors and shareholders before making even minor decisions. The chaebol supporters brush aside critics as just envious socialists who don’t understand or ignore free market principles. True, the founders of major chaebol, including Samsung, Hyundai and LG, were entrepreneurs, but many of their children and grandchildren seem to have inherited only their money, not the spirit of enterprise and genius. Even the founding fathers’ accomplishments wouldn’t have been possible without the permitted exploitation of resources, including the people who worked for them, at the national level. Now many of their grandchildren appear more interested in amassing assets through financial and other speculative activities rather than genuine corporate action. Chaebol families and a handful of their professional management cannot cope with the rapidly changing industrial structure of the future which demands enormous creativity and originality. The increasing economic polarization and deepening estrangement within the rest of society will also make another industrial leap by Korea difficult, because it requires social consensus. All this explains in part why the United States dissolved about 300 corporate trusts that dominated major industries about a century ago and has since kept weakening the power of monopolies and oligopolies through a series of antitrust legislation. Germany and Japan followed America’s example after World War II sometimes with the help of U.S. occupiers. Theories about Korean-style capitalism are as egregious as Korean-style democracy. What’s keeping the nation from transitioning from economic feudalism to advanced capitalism are the vested interests of chaebol and their parasites in all sectors of society ― politicians, bureaucrats, judges and journalists. Koreans should start again what their industrial counterparts underwent a century ago. Whoever occupies Cheong Wa Dae in 2013 should ensure this occurs.

Apple will debut mini iPad this year: sources

Apple Inc. plans to debut a smaller, cheaper iPad by year-end, two people with knowledge of the plans said, to help maintain dominance of the tablet market as Google Inc. and Microsoft Corp. prepare competing handheld devices.

The new model will have a screen that’s 7 inches to 8 inches diagonally, less than the current 9.7-inch version, said the people, who asked not to be identified because Apple hasn’t made its plans public. The product, which Apple may announce by October, won’t have the high-definition screen featured on the iPad that was released in March, one of the people said.

A smaller, less expensive iPad could undercut the ambitions of Google, Microsoft and Amazon.com Inc. to gain traction in the advancing tablet market, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. The new device will probably have a price closer to Google’s Nexus 7 tablet and Amazon’s Kindle Fire, both of which have 7-inch screens and cost $199.

iPad

“It would be the competitors’ worst nightmare,” Wu said in an interview. “The ball is in Apple’s court.”

Trudy Muller, a spokeswoman for Cupertino, California-based Apple, declined to comment.

Since the iPad went on sale in April 2010, Apple has dominated the tablet market, which is predicted by DisplaySearch to reach $66.4 billion this year. Apple has 61 percent of the market, according to Gartner Inc.

Apple’s rivals are eager to gain a toehold. Google said on June 27 that it will sell a tablet-style device called the Nexus 7. Earlier in the month, Microsoft announced a tablet called Surface that will have a similar screen size as the current iPad. Amazon’s Kindle Fire was released last year.

The entrants’ best chance of success has been to focus on markets where Apple had no toehold, said Jan Dawson, an analyst at Ovum Ltd. The Surface comes in two models that are most likely to appeal to buyers who want to continue using Microsoft’s Windows software, Dawson said. While Microsoft has not disclosed pricing or timing for either, the higher-end version will probably be pricier than the iPad and targeted more at an emerging class of laptop PCs called Ultrabooks, he said. The latest iPad ranges in price from $499 to $829.

Google’s Nexus 7 could stack up well against Amazon’s Kindle Fire, which went on sale in November. The Nexus 7, manufactured by Asustek Computer Inc., has a faster processor and better battery life than the Kindle Fire, as well as a front-facing camera.

Still, competing with a lower-priced iPad will be more challenging, Wu said. Apple benefits from having more than 225,000 apps that have been tailored specifically for the current iPad.

The company also boasts more than 360 retail stores where the device can be purchased and tested by consumers. Google said the Nexus will be available only from its online store, while Microsoft will sell its tablets online and at its smaller chain of 20 stores.

Apple has considered introducing a smaller tablet since the original iPad was released, one person said. That approach has worked for Apple’s iPod, which is the world’s top music player and comes in various sizes and colors.

Yet Apple co-founder Steve Jobs spoke skeptically of smaller tablets before his death in October. He said in 2010 that the iPad’s current size was the minimum required to ensure a good user-experience and enable attractive software applications.

The screen of the small model will have the same number of pixels as those in the iPad before it was upgraded to the so- called Retina Display earlier this year, one person said.

Apple also may be at an advantage profit-wise. The gross margin on the latest iPad is about 37 percent, according to Wu. Apple could earn a similar profit on a smaller iPad because it will probably use the cheaper screen, Wu said. Apple can also charge more for the device without sacrificing sales, he said.

“This isn’t like the old days, when it cost thousands of dollars more to buy an Apple product,” Wu said. “Fifty or a hundred bucks wouldn’t be enough to make someone switch.”

Amazon, by contrast, loses money on every Kindle Fire it sells, with the aim of profiting from sales of books and other digital media. At the $199 price of the Nexus 7, Google’s plan should be to break even on the hardware, in exchange for the opportunity to win advertising and related revenue, said Michael Gartenberg, an analyst at Gartner Inc.

Apple’s plans to release a smaller sized iPad were reported previously in blogs, including DigiTimes.

The stakes are high for Microsoft and Google to succeed at hardware sales. Both companies have risked alienating long-time hardware partners, such as Samsung Electronics Co., by selling their own tablets, Gartenberg said.

“How does Samsung make money in tablets, when Google is partnering with Asus to make a product that makes no money?,” he said.

A failure to gain traction with the Nexus and Surface, respectively, might also undermine the credibility of Google’s Android strategy and of Microsoft’s introduction of the next version of the Windows operating system, Wu said. If Google and Microsoft can’t make a must-have product around their own software, consumers may be harder to convince that hardware manufacturers could do it, he said.

“They’re really sticking their necks out this time, putting their own brands on this front and center,” Wu said.

(Bloomberg)

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