Mobile Headwinds End Samsung's Stellar Profit Growth Run

Yolanda Curtis
August 2, 2018

Samsung's mobile communications vice president, Lee Kyeong-Tae, acknowledged in an earnings call that sales of its flagship Galaxy S9 and S9+ had been "weaker than expected", as his unit reported a 22 percent drop in sales revenue to $20.2 billion.

The South Korean tech giant said that its April-June net income stood at 10.98 trillion won ($9.8 billion), up 2 per cent from 10.80 trillion won a year earlier.

The consumer electronics unit registered an operating profit of 510 billion won (456 million USA dollars) on revenue of 10.4 trillion won (9.3 billion US dollars).

Samsung said demand for DRAM chips, its main memory product, would remain strong in the second half thanks to the growth of server data centers used for cloud computing.

The company added however that robust demand for memory chips helped boost the operating profit.

The consolidated net profit was 11.04 trillion won ($9.85 billion).

Looking ahead, Samsung expects sustained strength in the memory market and growing demand for flexible OLED panels to drive earnings higher in the second half. Its semiconductor business continues to do resoundingly well, with continued increases in sales and profits.

The IT & Mobile Communications (IM) division, which makes smartphones, posted an operating profit of 2.67 trillion won (2.39 billion USA dollars) on revenue of 24 trillion won (21.5 billion US dollars).

To bounce back from sluggish sales, Samsung announced it will be introducing a new Galaxy Note a little bit earlier than usual.

Samsung's Galaxy X, meanwhile, is rumoured to be a foldable device, so it's possible the company is just positioning itself for a big comeback.

This is the first time Samsung DeX - which allows the Galaxy S8, Galaxy S9, and Galaxy Note 8 smartphones to be connected to a keyboard, monitor, and mouse to become a "desktop" - is available on a tablet.

Competition on the market is fierce at the moment and one of the biggest rivals of the Samsung Galaxy Note 9 is expected to be Huawei's Note 10, released under its Honor brand.

"It is not an easy game for Samsung unless it really meets consumer's needs for new smartphones". "In response, in order to secure our profitability, we will focus on expanding sales of our competitive new models in all segment [s], from flagship to mass models, and secure well organized and effective marketing campaigns". According to Samsung, the device is not performing well in the market as its sales margin is low.

Samsung Electronics said it has allocated 8 trillion won in facilities investment for the second quarter.

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