According to foreign media reports, Samsung Electronics released its second-quarter earnings report on June 30, 2018. According to the financial report, Samsung Electronics' operating profit in the second quarter reached 14.78 trillion won (about 13.3 billion US dollars), an increase of 5.71% year-on-year; revenue was 58.48 trillion won (about 52.3 billion US dollars), down 4.13% year-on-year.
Samsung Electronics’ net profit for the second quarter was 11.04 trillion won ($9.8 billion), down 0.09% from 11.05 trillion won in the same period last year. Samsung Electronics’ second-quarter earnings data is in line with the company’s previous preliminary earnings report, but not as expected. Samsung’s preliminary earnings report released earlier this month showed that the company’s operating profit for the quarter was 14.8 trillion won ($13.2 billion), up 5.2% from 14.07 trillion won in the same period last year; revenue was 58 trillion won. Compared with the same period last year, it fell by 4.9%.
Market analysts had previously estimated that Samsung Electronics’ operating profit for the second quarter was 15.2 trillion won and net profit was 11.6 trillion won. Samsung Electronics' net profit and operating profit did not reach market expectations, mainly because the global smartphone growth slowed down the market demand for Galaxy equipment, and Chinese display competitors increased competition to supply display screens to the market.
Samsung Electronics' net profit and revenue declined year-on-year, reflecting the fact that despite the flexible sales of memory chips supporting the company's overall performance, the company faces serious difficulties in its mobile business. While Chinese smartphone makers Huawei, Xiaomi, and OPPO are gaining global market share, Chinese display manufacturers are also threatening a series of Samsung Electronics products, such as low-cost TVs and cutting-edge smartphone displays.
"The decline in sales of the Galaxy S9 and the increase in marketing expenses have affected Samsung Electronics' profits," Kim Yang-jae, an analyst at KTB Investment & Securities, a Korean brokerage, said in the report. "In view of the slowdown in demand and increased competition, Samsung Electronics' profit growth may be small," the analyst said before the earnings report.
In the Chinese market, the world's largest semiconductor market, Samsung Electronics and SK Hynix, Micron and other chip giants are facing antitrust investigations for conspiring to manipulate market prices. These three companies together account for more than 90% of the global DRAM memory chip market. Samsung Electronics’ operating profit in the second quarter of the chip division was 11.6 trillion won, accounting for 78% of the company’s overall operating profit, up 44% from the 9.69 trillion won in the same period last year. According to data provided by InSpectrum Tech, a third-party storage chip research company, the price of 32GB DRAM memory chips increased by 2.8% in the second quarter of this year; the price of 128GB NAND flash chips fell by 9%.
The display panel business occupies another chunk of Samsung Electronics' revenue. While Samsung Electronics and Apple compete in the high-end smartphone market, the company is also the sole supplier of Apple's iPhone X OLED display. The operating profit of Samsung's electronic display business in the second quarter was 140 billion won, down from 1.7 trillion won in the same period last year.
In the face of increasing pressure from Chinese competitors, the operating profit of Samsung Electronics' smartphone division fell to 2.67 trillion won in the second quarter, down 34% from 4.06 trillion won in the same period last year. After a decade of growth, demand for the global smartphone market is slowing as consumers begin to wait for the next generation of new mobile phones with innovative technologies, such as flexible screens and devices that support 5G mobile networks.
“Even consumers who want to have the latest features can't afford to buy a smartphone with new features and features at a high price,†says Paul Swiercz, a professor of management at George Washington University. “Consumers no longer believe that the next generation of smartphones will be more intelligent.â€
The operating profit of Samsung Electronics' home appliance business, which includes TV sets and home appliances, was 510 billion won in the second quarter, up 45% from 350 billion won in the same period last year.
Samsung Electronics’ second-quarter results benefited from the depreciation of the Korean won’s exchange rate. The company said earlier this year that one of the biggest obstacles for the company was global protectionism, warning its employees to prepare for potential impacts. Samsung Electronics is also expanding the production capacity of memory chips and smartphones. The company announced last year that it will invest 20 trillion won to expand its chip production capacity in South Korea and complete the construction of the world's largest smartphone factory in India this year.
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