Operating Profit of Smartphone Business Falls Below 2 Tril. Won
Samsung Electronics Co.’s smartphone business saw its operating profit slide to 1.56 trillion won (US$1.32 billion) in the second quarter of this year. The figure fell below the 2 trillion won (US$1.69 billion) mark in two quarters since the fourth quarter of last year when it posted 1.51 trillion won (US$1.28 billion).
The South Korean tech giant announced on July 31 that the IT & Mobile Communications (IM) business division, which is in charge of the smartphone business, posted 25.86 trillion won (US$21.86 billion) in sales and 1.56 trillion won (US$1.32 billion) in operating profit in the second quarter.
The division’s operating profit plunged nearly 41 percent from 2.67 trillion won (US$2.26 billion) a year ago and 31 percent from 2.27 trillion won (US$1.92 billion) in the previous quarter. Securities firms estimated its operating profit at the low end of the 2 trillion won range. Samsung Electronics continued to record an operating profit of more than 2 trillion won to 3 trillion won (US$1.69 billion to US$2.54 billion) except two quarters -- the third quarter of 2016 when the Galaxy Note 7 fire incident occurred and the fourth quarter of last year.
The company said the IM division’s operating profit plunged to the 1 trillion won (US$845.31 million) range due to slower sales of the Galaxy S10 flagship smartphone and a strengthened lineup of low-end models, including the Galaxy A series. Currently, sales of the Galaxy S10 have slowed down compared to the first quarter when the model was first launched. In addition, the profitability got worse as Samsung Electronics has significantly improved the hardware functions of the Galaxy A series because of intensifying competition in the low-end smartphone market. The Galaxy A series have been equipped with innovative technologies from last year, such as triple rear cameras and a rotating pop-up camera and optical fingerprint sensor.
Market experts expect that the Galaxy Note 10, which is to be unveiled in New York on Aug. 7 (local time), and the Galaxy Fold to be released in September will improve the company’s earnings in the second half.
A company spokesperson said, “We are planning to strengthen our strategic product lineups, including the Galaxy Note 10 and the Galaxy Fold, and expand sales of new low-end models at the same time, while continuously making an effort to improve profitability by maximizing operation efficiency.”