Is Samsung’s record profit run finally at an end?

31 Jul 2018

Samsung Galaxy S9 phones. Image: Framesira/Shutterstock

While Samsung’s profit growth may have slowed, the company’s chip sales have been stellar.

Samsung posted its slowest quarterly profit growth in more than a year today (31 July). The company said the operating profit from the mobile element of the business showed the steepest decline rate since Q1 of 2017.

The company made an operating profit of 14.87trn won ($13.3bn) on sales of 58.4trn won ($52.1bn) and revenue was down 4pc year on year. It said the slow performance of the S9 and overall softer smartphone and display panel sales were the root causes of the drop in revenue.

Competition is heating up for Samsung

The burgeoning US-China trade war and the rise of Chinese competitors building new handsets to rival Samsung is also having an effect on the bottom line.

Xiaomi and Huawei have made massive inroads in the Chinese and Indian markets, which are the two largest smartphone market pools on the planet. While Samsung’s position as the world’s largest smartphone maker is still secure, lower-priced models are tempting some users away from the brand.

Demand for Samsung’s flexible OLED panels also dropped, while LCD shipments fell in price and quantity. The OLED demand is expected to pick up in the second half of 2018, particularly if Apple launches new models. The Samsung rival already uses the OLED panels in the iPhone X and two new phones are expected from Tim Cook’s team later in the year.

The company also said it is betting big that foldable phones could become popular among consumers. KyeongTae Lee, vice-president of Samsung’s mobile division, told analysts the company is “hoping that such adoption will serve as a catalyst in the stagnated mobile market”.

A positive outlook, despite some hiccups

It is not all doom and gloom, though. The World Cup saw strong sales of premium televisions and the semiconductor department is still the company’s major profit driver. Samsung added that DRAM chip demand is set to remain steady as server data centres used in cloud computing continue to crop up.

Sales to the cloud computing and cryptocurrency industries kept things going smoothly here while PC gaming also held up the graphics segment of the business.

Despite some bumps in the road, the company’s outlook remains sunny for the second half of 2018. “Looking ahead, Samsung expects sustained strength in the memory market and growing demand for flexible OLED panels to drive earnings higher in the second half.”

Analysts largely agreed, saying this quarter is likely to be an anomaly and that the firm should return to record profits later in the year.

Samsung Galaxy S9 phones. Image: Framesira/Shutterstock

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects