Early 5G mobile network technology deployments put positive pressure on first quarter 2019 earnings for Samsung, but the firm still took a 60 percent dive on operating profits for the period, the result mainly of weak chip prices and reduced demand for display panels.
Samsung released its Q1 financials as retailers, marketers and other players in digital payments and commerce are trying to shore up their plans for 5G commerce. The “accelerating commercialization of 5G in [South] Korea” contributed to “solid” earnings growth in the company’s I.T. and mobile communications unit, Samsung said — sales there increased 17 percent year over year, to some 27.2 trillion won (about $23.3 billion).
“In addition, demand for 5G chipsets solutions is also expected to rise on the back of increasing sales of the 5G enabled smartphone,” said Ben Hur, Samsung’s senior vice president Semiconductor Business System LSI, during the post-earnings conference call with investors. “We will seek to secure new multiple customers in the U.S. and China for 5G chipset solutions and commercialize them in a timely manner. We also concentrate on developing the next 5G chipset solution by integrating an application processor and 5G modem into one single chip.”
That said, operating profit declined about 60 percent to approximately $5.3 billion. Total revenue declined 13.5 percent, to about $44.9 billion. For the company’s semiconductor business, Samsung said that “inventory adjustments at major customers kept demand weak,” which resulted in a 7.4 percent decline in operating profits and a 23 percent year-over-year decline in revenue during the first quarter. For Samsung’s mobile business, operating profit declined 1.5 percent year over year. The company said it shipped 78 million Galaxy S10 phones, but added that “sales volume gains were modest due to a reorganization of mid-range and below devices. Profitability improvements were limited by increased expenses related to higher-spec products, brand marketing, and the lineup refreshment.”
For the upcoming quarter, “we expect our smartphones shipment to grow slightly quarter-on-quarter as the newly launched A Series is getting a positive effect from the market, particularly [in] response to diverse customer needs in a rapidly changing market,” JongMin Lee, Samsung’s vice president, mobile communications business, said during the conference call. “For the new Galaxy Note, we will build on its own strength, which is a larger display and pen, while also increasing series of innovative products, such as 5G models and foldable devices.”
Samsung offered no new information about its payment offerings during the call.