Samsung says profits fell due to slow S9 sales
Samsung’s continuous run of increasing profits was brought to an end in the past quarter, i.e. the second quarter of 2018. Samsung released its earnings guidance earlier this month and now it has confirmed that slow Galaxy S9 sales have been one of the main reasons behind the fall in profits. This is in line with the predictions of industry analysts, which attributed slow S9 sales as a major factor behind the Korean giant suffering a fall in profits.
All in all, Samsung Electronics has finally been hit by the sluggish smartphone demand all around the world. The smartphone market has been declining for quite some time now and it seems like the biggest smartphone manufacturer in the world is not safe from the decline in demand. The market has seen incredible growth in the last 10 years but sadly, what goes up must come down as well; the market is now saturated to a point where smartphone shipments are actually decreasing.
Samsung revealed that its smartphone division has gained 2.7 trillion won in Operating Profit, down from 4.1 trillion won gained last year. Experts have said that consumers are now waiting for actual innovation in smartphones instead of minor cosmetic changes (as can be seen in the Note 8 and Note 9). Upcoming technologies like bendable/foldable smartphones along with 5G compatible phones are the talk of the town right now. An analyst commented, “Even those wanting to own the latest and greatest are having difficulties paying high-margin prices for performance and features that have topped out.”
Samsung’s chip division has seen mixed performance over the past few months. Samsung is currently embroiled in a market manipulation lawsuit along with two other companies, Micron Technologies and SK. Hynix Inc. All three companies control more than 90% of the dynamic random access memory (DRAM) market, giving them a monopolistic power over other manufacturers. Operating income from the chip business amounted to 11.6 trillion won, which can be attributed to a 2.8% increase in prices of DRAMs as well.
Samsung’s display business has seen a considerable downfall in the past few months despite being the sole supplier of OLEDs for Apple’s current flagship, the iPhone X. However, Samsung saw a saturation in demand for OLEDs amid slow sales of the iPhone X. Subsequently, the operating profit of the display division went down to 140 billion won from 1.7 trillion won last year. Samsung expects the display business to come up again when the upcoming 2018 OLED iPhones are launched by Apple, even though Apple is looking to source OLEDs from LG and BOE Technologies.
An analyst said, “Chips remain the goose that lays golden eggs for Samsung, but golden days may be over for its smartphones.”