Samsung warned of lower profits in 2018 due to weak smartphone sales
South Korean tech giant Samsung Electronics has warned of lower profits in 2018, due to weak smartphone sales, which dwarfed record chip revenue. The company made the announcement during its second-quarter financial statement presentation, ending a string of rising earnings.
The company released profit guidance of KRW 14.8 trillion ($13.2 billion) in operating profit from KRW 58 trillion ($51.8 billion) in revenue for the second quarter, which would represent a 0.7% decrease in sales and an 11% increase in profit for the year. -in the year. However, last quarter, Samsung made 15.64 trillion KRW in revenue gains of 60.56 trillion KRW, its best results to date. This ends the series of 4 consecutive quarters in which the world’s largest smartphone manufacturer was making more and more profit.
Although the chip business will post a record profit for the seventh consecutive quarter, the weaker performance of the smartphone business has raised concerns that the mobile business remains unmanageable to drive sales of premium Galaxy devices. Poor sales of the Galaxy S9 have affected Samsung’s results in the second quarter.
According to analysts, the lower sales are due to the stabilization of the smartphone market and increased competition.
Samsung shares have fallen about 12% this year on concerns about slower earnings growth and a lack of technological innovation to boost smartphone sales.
New data from Counterpoint Research highlights Samsung’s woes, showing its new premium Galaxy 9 Plus being overtaken by Apple’s iPhone 8 as the world’s best-selling smartphone due to weaker sales in Europe.
Competition from cheaper Chinese brands like Xiaomi and Huawei has already pushed Samsung to lose market share in China and India, which are the world’s top smartphone markets.
Although the smartphone business is not good, Samsung’s profits are largely due to strong global sales of DRAM and NAND chips, which account for about 30% of its revenue.
Total sales revenue decreased 4.9% year-on-year to KRW 58 trillion, Samsung announced, compared with analysts’ expectations of KRW 59.7 trillion. The company will share more detailed information in July.
Chip prospects remain good, with the next iPhone likely to boost NAND chips after they fell as much as 15% in the second quarter.
Things may improve for Samsung later in the year, but OLED panel sales could disappoint. Apple reportedly expects a new 6.1-inch LCD-based iPhone to account for a larger share of sales in its lineup this year.
Overall, Samsung’s third quarter earnings will be stronger than the second quarter as the company will perform better in the chip and display business. The company’s forecast for the second quarter is for an increase of 5% compared to the same period of the previous year, but it does not meet analysts’ expectations. Investors, however, are increasingly concerned about the possibility of a US-China trade war and how it could affect major exporters such as South Korean tech giants.