Earnings

Samsung Q2 Disappoints On Weak Smartphone And Display Panel Sales

Samsung

Samsung Electronics reported weaker than expected results during the second quarter as slow sales of smartphones and display panels resulted in a revenue decline.

Samsung said its IT and mobile business reported a slowdown both on a year-over basis and from the first quarter, due to weakness in the high-end Galaxy S9 mobile device. Samsung warned of continued weakness in mobile during the second half, due to pricing issues and new product introductions from competitors, and said it planned to move up the preview date of its new Galaxy Note for an August 9 event in New York.   

Samsung officials said quarter-over-quarter demand for mobile devices fell due to weaker than expected sales of flagship models and discontinuing older, low-end models. The company said sales of S9 and S9 + missed internal targets amid a slowdown in overall high-end mobile demand and increased competition among flagship models, according to a conference call transcript from Seeking Alpha.

The company also plans to increase the amount of technical specs and offer more competitive pricing in mass model devices to respond to competitive pressures. The firm warned this activity will make it harder to achieve profitabliity, but will help to grow sales.

Company executives said there was weaker demand for its flexible OLED panels, while the shipment and price for LCD panels dropped as well. Samsung officials said they expect second-half sales for OLED to rebound, amid increased demand for flexible displays. The company plans to add some additional features into its displays, including fingerprinting technology.

Demand will increase for high-resolution and ultra-large televisions, but competition and capacity expansion by Chinese manufacturers will likely keep profits muted, officials said.

The company reported a 6 percent increase in operating profit for the quarter, to reach KRW (Korean Republic Won) 14.87 trillion, while revenue fell 4 percent in the quarter to KRW trillion 58.48 in the quarter. The company said operating profit and revenue were down from the first quarter, and said the Korean won fell against the U.S. dollar, but rose against the Euro, resulting in a KRW 400 billion impact.

The company reported strong sales in its semiconductor business, fueled by demand for DRAM chips used in data centers and NAND flash memory, used in high capacity storage, noting that NAND prices are softening.

The company expects to see new opportunities, both medium and long term, in AI, 5G and Internet of Things [IoT] businesses. Due to its evolving Bixby ecosystem, which connects smartphones, televisions, refrigerators and other devices and appliances, the company plans to offer personalized service to customers and work to create synergies with Samsung Pay.

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