strong decline in profits and good sales of the Galaxy S10

  • The Galaxy S10 sells excellently, but the demand for last year's flagships has fallen more than before due to the popularity of the new middle-class Galaxy smartphones.
  • The main problems are due to the decrease in memory demand.
  • Conclusions from the financial results of other divisions.
  • The release date of Galaxy Fold will be announced in a few weeks, probably in the second half of the year.
  • Some forecasts for the future

Previously, Samsung Electronics had warned investors that this quarter would have made much less money, and now the company has reported financial results in the first quarter. The semiconductor giant's profit fell two and a half times over the same period last year, from 15.64 billion won (about $ 13.4 billion) to just 6.2 trillion won ( about $ 5.3 billion).

It is worth noting that Samsung's total revenues in the quarter under review amounted to 52.4 trillion won ($ 45.2 billion), which is significantly lower than in the first quarter of 2018, when total company revenue they reached 60.6 trillion won ($ 52 2 billion).

But unlike Google, the company doesn't blame its flagship smartphones for damage – Samsung claims the Galaxy S10 series is really selling well. During the quarter, the company was able to make a total of 78 million phones and another 5 million tablets, and the unimpressive sales results for the quarter are explained by the fact that mid-range models consume some of the sales of the Last year's flagship Galaxy models.

This is logical, because to a large extent Samsung's new strategy in the mobile market is to offer the latest features in middle-class devices like the new A series. Samsung also plans to sell a slightly larger number of phones in the second quarter of this Year compared to the first quarter. Mobile unit revenues fell slightly, while profits fell 1.7 times. The company explains this by increasing competition and a general decline in demand in the smartphone market.

However, the company mainly explains its main problems in reducing profits mainly of the same factor as the previous quarter: the decline in demand for memory chips, which brings most of Samsung's revenue, inventory management and a decrease in demand of display. The company said the situation should improve in the second half of the year, with the growing demand for flash memory for servers and smartphones with a 256 GB drive and above. The demand for large memory chips is already growing at the expense of leading smartphones.

The company said its business in the semiconductor industry showed an increase in revenue due to the increase in the supply of modems and smartphone processors. The network business feels good due to the launch of 5G networks in Korea. The display panel division showed slight losses due to lower demand for flexible screens and an increase in the market for large panel suppliers. At the same time, sales of high-end televisions (solutions with QLED panels and very wide diagonal) allowed the consumer electronics division to show growth.

In the current second quarter of the year, Samsung expects a limited improvement in the memory chip market, as demand is expected to improve in areas such as mobile electronics. However, prices will continue to fall at the same time. The demand for mobile processors and CMOS is growing and Samsung also expects an increase in the demand for conventional rigid panels.

Initially, Samsung did not mention its deferred folded folding smartphone, but then responded to a request from journalists, claiming it would report an updated launch program in the coming weeks. Perhaps the advanced unit will enter the market in the second half of the year, depending on how you interpret the following passage in a press release:

"In the second half of the year, despite the increase in market competition, Samsung expects smartphone sales to increase thanks to new models in all segments of the Galaxy series there to the galaxy Note due to a seasonal increase in demand. In the leading solutions segment, the company will strengthen its leadership with the new Galaxy Noteas well as innovative products like 5Gfolding solutions and smartphones.

More generally, the company expects the increase in the demand for flexible screens to help its display activity thanks to the new nameless smartphones scheduled for release. However, the company also believes that the demand for flexible displays can currently be quite weak. Now the company is betting on ordinary screens.

Samsung believes that in the second part of the year, the demand for memory chips will recover, although some external uncertainty remains. In the second part of the year, competition in the developed TV and smartphone markets is expected to increase, which will create problems for the company: in response, the Korean manufacturer will focus on high-end devices.

In the medium and long term, Samsung seeks to improve the competitiveness of key areas by diversifying areas and introducing innovations in the field of device components and formats. Samsung also continues to expand its technological capabilities in the automotive industry using HARMAN solutions and applying AI solutions.

In the quarter under review, Samsung Electronics' capital expenditures amounted to 4.5 trillion won ($ 3.9 billion) and the company invested 3.6 trillion won ($ 3.1 billion) in development of semiconductor production and 0.3 trillion won ($ 0.26 billion) – in the production of screens.

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