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Will Samsung Electronics’ Quarterly Operating Profits Go Below 15 Trillion Won?
Uncertainties Lying Ahead
Will Samsung Electronics’ Quarterly Operating Profits Go Below 15 Trillion Won?
  • By Yoon Young-sil
  • June 26, 2018, 14:22
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Samsung Electronics’ streak of 15 trillion won (US$13.45 billion) in quarterly operating profits is expected to be over in three quarters and the “highest quarterly sales” in seven quarters.
Samsung Electronics’ streak of 15 trillion won (US$13.45 billion) in quarterly operating profits is expected to be over in three quarters and the “highest quarterly sales” in seven quarters.

Global sales of the Galaxy S9, which surpassed 10 million units in just one month after its release in March, have been falling in the second quarter. Eugene Investment & Securities Co. forecast that its quarterly shipments would stand at 9.5 million units. Some even say that the sales figures could be the lowest after the Galaxy S3 launched in 2012.

The sluggish sales of smartphones causes concerns over Samsung Electronics’ performance. Korea Investment & Securities Co. even said that the company’s operating profits in the second quarter would stand at 14.7 trillion won (US$13.18 billion). If the current trend continues, the companys' streak of 15 trillion won (US$13.45 billion) in quarterly operating profits will be over in three quarters and that of highest quarterly sales in seven quarters.

The price of Samsung Electronics shares dropped 1.27 percent on June 25, while that of SK Hynix shares dropped 5.25 percent. Samsung Electronics saw its set business lose steam. For television, the company was put in a defensive corner by the growth of its Chinese counterparts, such as Haier Group and TCL Corporation, driven by “half-price strategy,” and the revival of Japan’s Sharp Corporation. As a result, there are growing concerns that Samsung Electronics’ share in the TV market, which fell to 20 percent last year, will not be able to maintain the same level. This is why Samsung Electronics, whose main products are QLED TVs, is planning to strengthen its premium lines to MicroLED TVs in the second half of the year, according to market experts. An executive of Samsung Electronics said, “In China, the distribution network, which was destroyed with the THAAD issue, shows a slow recovery and an increasing number of Chinese shows a stronger preference of Chinese products.”

In addition, Samsung Electronics’ semiconductor business is no longer stable. This is largely due to the fact that the price of NAND flash chips shows signs of stagnation and decline in the second quarter. When China’s YMTC Co. starts mass production of 32-layer NAND memory by the end of this year, oversupply can be accelerated. The sales of NAND flash chips are expected to decrease from 6.35 trillion won (US$5.69 billion) in the first quarter to 6.18 trillion won (US$5.54 billion) in the second quarter.

The rapid increase in DRAM demand for servers and mobile devices with the release of premium smartphones and the launch of Apple’s new iPhone series in the third quarter are considered only favorable factors. An executive in the business circle said, “It is unstable as the company’s competitiveness in smartphones and home appliances is becoming weak and the percentage of semiconductors in total profits went up to a whopping 74 percent.”