Samsung Profits Falter On Disappointing Galaxy S9 Sales
Shares of Samsung are down more than 2 percent today after the South Korean electronics posted its earnings guidance for the second quarter of 2018. The disappointing numbers suggest that Samsung's flagship handsets, including the Galaxy S9 and Galaxy S9+, are struggling to maintain strong sales momentum amid increased competition in the marketplace.
Samsung reported that sales for the second quarter fell to 58 trillion won (~$52 billion), compared with 60.56 trillion won (~$54.3 billion) in the previous quarter, and 61 trillion won (~$54.6 billion) in the same quarter a year ago. The company also a sequential decline in operating profit, which dropped from 15.64 trillion won (~$14 billion) to 14.8 trillion won (~$13.3 billion), though that is up year-over-year from 14.07 trillion won ($12.6 billion).
Softer sales of Galaxy S9 devices are largely to blame, though we will have to wait for Samsung's full financial report to see what extent they affected the company's bottom line. The company faces increased competition from the likes of Huawei, Oppo, and Xiaomi in China, the world's largest smartphone market, and it's starting to take a toll.
The good news for Samsung is that it isn't solely reliant on smartphone sales. Samsung is a major player in various other market segments, including memory and semiconductors, where most of the company's profits come from. Samsung could also benefit from a weakening won.
"While chip sales keep rising, smartphones aren’t looking good," Jung Sang-jin, a fund manager at Korea Investment Management, told Bloomberg. "While chips and phones cancel each other out in profit, the weakening won may work in Samsung’s favor in the second half."
Fears of a trade war have weakened the Korean currency in recent weeks, and that could play in Samsung's favor. However, that's a short-term band-aid of sorts. While Samsung is not totally reliant on smartphone sales, it's still an important part of the company's overall business. Samsung isn't expected to release its next flagship phone, the Galaxy S10, until 2019.
