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Samsung’s Profit Halves on Weak Chip, Smartphone Sales in Q2

The consumer electronics division was boosted by strong sales of new appliance products, but profits from TVs fell slightly from a year earlier due to intensifying competition

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To get ahead in the fast-changing tech industry, Samsung said it will expand investment in burgeoning tech segments to propel growth. Wikimedia Commons

Samsung Electronics said on Wednesday its second-quarter net profit more than halved from a year earlier on weak chip prices and tepid smartphone sales, warning that Japan’s export curbs cloud its business outlook.

Samsung said it sold 8.3 million smartphones and 4 million tablets in the second quarter, predicting similar levels of shipments in the third quarter.

The net profit for the world’s largest chip and smartphone maker came to 5.18 trillion won ($4.4 billion) in the April-June period, a 53.1 per cent fall from a year earlier, the company said in a regulatory filing.

The operating profit plunged 55.6 per cent on-year to 6.59 trillion won, and sales slipped 4 per cent to 56.1 trillion won in the three-month period, the firm said in a statement.

Samsung said the lower-than-expected memory chip prices weighed on its bottom line despite a slight recovery in demand in the second quarter.

The semiconductor business posted 3.4 trillion won in operating profits in the second quarter, the lowest since the third quarter of 2016.

“The weakness and price declines in the memory chip market persisted as the effects of inventory adjustments by major data center customers in the previous quarters continued, despite a limited recovery in demand,” Samsung said.

Although the chip giant expected a gradual recovery in the demand side in the latter half of this year, it expressed concerns over rising uncertainties amid the prolonged trade war between the US and China and, more recently, Japan’s export curbs on South Korea, reports Yonhap news agency.

Samsung is also preparing for Japan’s decision to remove South Korea from a list of trusted buyers as early as Friday, which would affect a broader range of high-tech materials.

samsung galaxy fold
Connectivity options on the Samsung Galaxy Fold include WiFi, GPS, and USB Type-C. Flickr

“Even though the current Japanese measures don’t ban exports of the materials, the new export regulations add burden (on the company), and visibility is low on Japan’s trade measures,” Robert Yi, executive vice president for investor relations, said.

“Company executives are preparing various measures to minimize its negative impact on the company.”

Samsung said it is hard to predict fresh cash flows due to global trade tension, delaying its earlier plan to announce its shareholder return policy to early 2020.

Samsung expected prices of NAND, mostly used in mobile devices, will pick up in the third quarter, given the stabilising inventory level and rising demand in the second quarter.

The mobile division also posted lacklustre profits despite strong sales of budget smartphones, the Galaxy A series, in emerging markets.

Although Samsung has upped the ante to invigorate the flattening smartphone market by releasing 5G smartphones in South Korea and the US, it failed to shore up its profits in the mobile division.

To boost demand in the premium segment, the firm plans to release its latest phablet, the Galaxy Note 10 in August and Galaxy Fold in September. Samsung had planned to release the foldable device in April but delayed the release to September as it took time to fix some durability issues.

“We will sell a limited volume of Galaxy Folds in limited countries this year and expand foldable products in various forms,” a Samsung official said during the conference call. “We expect the Galaxy Note 10 to achieve higher sales volume than its predecessor, the Note 9.”

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The network business showed solid results on the commercialisation of 5G service in South Korea, the firm said, adding it will step up efforts to expand global presence in the 5G market.

In contrast, the display division was a rare bright spot for the Korean tech firm, which has strength in the flexible OLED displays used in premium smartphones.

The consumer electronics division was boosted by strong sales of new appliance products, but profits from TVs fell slightly from a year earlier due to intensifying competition. (IANS)

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5G Samsung Smartphones Capture 5% of Global Premium Market

Currently, all the 5G phones available fall within the premium segment, but this will also change in 2020

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The adoption of 5G will play a key role in the growth of the premium segment as well as the overall global smartphone market. Pixabay

5G smartphones captured 5 per cent of the global premium market in the third quarter (Q3) of 2019 led by Samsung with 74 per cent share followed by LG with 11 per cent and Vivo with 5 per cent share, a new report by Counterpoint Research has said.

According to Counterpoint Research “Market Pulse” service, the global premium market sell-through, however, declined 7 per cent YoY.

The Samsung Galaxy S10 5G was the top-selling model which captured over one-third of the total sales of all 5G devices.

“All major OEMs in the premium segment now have 5G-capable devices, except Apple. Still, Apple alone captured over half of the premium market in Q3 2019. Apple grew 1 per cent YoY increasing its market share from 48 per cent a year back to 52 per cent during the quarter. iPhone XR was the top-selling model globally in the premium segment,” Varun Mishra, Research Analyst, Counterpoint Research, said in a statement.

Huawei remained in the top three OEMs in the premium segment driven by the popularity of its P30 series, especially in China, despite the US ban.

China contributed to over 80 per cent of Huawei’s sell-through in the premium segment as compared to 73 per cent in the year ago quarter.

“The trend is likely to continue. It will be difficult for the newly launched Mate 30 series to create any progress outside China because it lacks Google Mobile Services (GMS). GMS is an important enabler for Huawei to continue its success outside China,” Mishra noted.

OnePlus recaptured its position among the top five OEMs in the segment and also led the India premium segment, which reached a record high shipment level during Q3.

South Korean smartphone maker LG also captured a spot in the top five, driven by the V50 ThinQ 5G. The firm grew 20 per cent YoY in the premium segment. This is in contrast with its overall smartphone shipments, which declined over 30 per cent YoY during Q3.

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5G smartphones captured 5 per cent of the global premium market in the third quarter (Q3) of 2019 led by Samsung with 74 per cent share followed by LG with 11 per cent and Vivo with 5 per cent share. Wikimedia Commons

The adoption of 5G will play a key role in the growth of the premium segment as well as the overall global smartphone market.

Apple will launch its 5G devices in 2020 driving upgrades among Apple users and potentially pulling in some previous Android users.

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“Currently, all the 5G phones available fall within the premium segment, but this will also change in 2020. Major Chinese OEMs will launch 5G-capable devices in the sub-$ 400 price band. China will drive the 5G segment followed by other key markets like the US and Korea,” Mishra added. (IANS)