The situation in the second quarter of Samsung is not very satisfactory. As the memory chip drags the whole group down, smartphones become powerless.
Although revenue from this quarterly smartphone business can be improved, their profits may still fall freely. Competitive pressure from Huawei and Xiaomi continues to erode the profit margins of Galaxy phones, which are "shrunken" much more than they were a few years ago.
Specifically, Samsung's IT & Mobile Communications (IM) segment is responsible for smartphone business, which is expected to bottom out at $ 1.7 billion according to securities companies. This figure is significantly lower than the $ 2.27 billion recorded a year ago, and continues to fall from $ 1.93 billion in the first quarter of this year. First-quarter capital was the first quarter they achieved profit of less than 2 billion USD, so the second quarter continued to go down.
Samsung warned in the second quarter, revenue (blue) will fall 4%, profits (green) will decrease 56%
In terms of sales, it is expected to increase slightly to about 75 million smartphones. According to Counterpoint Research, S10 sales are 12% better than S9 in the March to May period. However, this sales has not generally been turned on, mainly because the whole market is saturated and users "lazy" to change the machine.
The eroded profit is not really because of S10, but because of the Galaxy A mid-range, which accounts for a large amount of sales. Under the competitive pressure of Huawei and Xiaomi, Samsung is forced to bring many innovations to the device such as multi-lens camera, optical fingerprint sensor. The increase in sales thanks to low-cost and mid-range machines, which narrowed profit margins, is the reason for the decline in profit of smartphone units.
The Galaxy A is the cause of Samsung's mobile profit bottom
Samsung benefited from Huawei being embargoed, but the increase in sales was mainly on lower-end machines. Their average selling price will not increase, so the final profit is reduced. This contrasts with the speculation that some people may come up after Huawei "falls off".
Expecting to turn the company's situation into the Galaxy Fold and Note 10, two smartphones will be launched in the second half of 2019. These are high-end machines, so it will also help increase the average selling price of Galaxy phones. If successful in terms of sales, profits of the third and fourth quarters of the mobile segment could recover, instead of hitting the bottom like the current Q2.