Galaxy S8 Effects
Samsung Electronics recorded an earnings surprise in the second quarter of the year thanks to the effects of the Galaxy S8 smartphone launched in the first half of this year. Samsung's Mobile (IM) Business Division posted operating profit of 460 billion won (US$414 million) in the second quarter, surpassing operating profit of 4 trillion won in four quarters.
On July 27, Samsung Electronics posted 61 trillion won (US$54 billion) in sales and operating profit of 14.1 trillion won (US$12.6 billion) in operating profit in the second quarter of this year. Among them, the IM Division posted 30.0 trillion won (US$27 billion) in sales and 4.6 trillion won (US$4.1 billion) in operating profit. The figures were even higher than the industry’s expectations.
Sales grew 28% from 23.5 trillion won (US$ 21 billion) in the previous quarter and operating profit shot up 96% from 2.07 trillion won (US$1.8 billion) in the previous quarter. Year on year, sales expanded 13% from 26.56 trillion won (US$23.9 billion) and operating profit shrank 6% from 4.32 trillion won (US$3.8 billion).
The IM Division's operating profit exceeded 4 trillion won (US$3.6 billion) for the first time since the second quarter of 2016 (4.32 trillion won or US$3.8 billion). In the second quarter of last year, sales hit 4 trillion won (US$3.6 billion) in eighth quarters thanks to strong sales of the Galaxy S7.
The Galaxy S8 series released on April 21 was the greatest contributor to the IM Division’s strong performances. The model released a month later than usual due to the aftermaths of the discontinuance of the "Galaxy Note 7," enjoyed strong sales, exceeding 10 million units in global sales in just one month. This marked the fastest sales record among the Galaxy S series. The domestic securities industry expects annual sales of the Galaxy S8 to stand from 40 million units to 60 million units. If the Galaxy S8's annual sales hit 50 million units, the Galaxy S8's annual sales will break a record of 49 million units set by the previous Galaxy S model, the Galaxy S7.
The Galaxy S8 series did not offer Bixby's language service in an early period after its launch and some of its products suffered from problems such as reddish displays or Wi-Fi connection failure. However, in conclusion, the problems did not have a big impact on its sales volume.
However, in the third quarter, the IM Division’s sales and operating profit are expected to slow down somewhat due to a decline in Galaxy S8 shipments despite the launch of the Galaxy Note 8. The fact that Apple has standby demand for about 24 million units of the iPhone 8 to be launched in honor of its 10th anniversary in the US market for 'iPhone 8' is also pointed out as an obstacle to sales of the Galaxy Note 8.
Taurus Investment & Securities projected that the IM Division will post 22.84 trillion won (US$20.5 billion) in sales and 2.649 trillion won (US$2.38 billion) in operating profit in the third quarter of this year. Dongbu Securities forecast 25.1 trillion won (US$22.5 billion) in sales and 2.8 trillion won (US$2.5 billion) in operating profit while Eugene Investment and Securities 26.1 trillion won (US$23.4 billion) in sales and 3 trillion won (US$2.7 billion) in operating profit.
"Sales and profits are expected to drop from the previous quarter due to a decrease in the effects of the launch of the Galaxy S8 series, an increase in the portion of mid- to low-priced smartphones, and an increase in marketing expenses due to the launch of a new model of the Galaxy Note series,” a Samsung Electronics official said. “We will continue to build an open ecosystem that will enable Samsung Pay, Samsung Cloud, and Bixby to interoperate with other companies’ services.”