Despite Concerns Over Direct Impact of COVID-19... Samsung Smartphones Perform Well in Q2

Q2 IM Division Operating Profit Expected at Around 1.7 Trillion KRW
Quarterly Shipments Down 14%... Thanks to Cost Reduction
Seeking Rebound with August Unpacked Galaxy Note20 and Fold2

[Asia Economy Reporter Han Jinju] Despite concerns over COVID-19 in the second quarter, Samsung Electronics' smartphone performance held up well. By reducing offline marketing expenses and increasing online sales, the company achieved results that significantly exceeded market expectations.

Recovery from May... Effect of Galaxy A Series Launch

On the 7th, Samsung Electronics announced its preliminary second-quarter earnings with sales of 52 trillion KRW and operating profit of 8.1 trillion KRW. Securities firms estimated that the IT & Mobile (IM) division would record sales of 25 trillion KRW and operating profit between 1.5 trillion and 1.7 trillion KRW. Although this is similar to the same period last year (1.56 trillion KRW), it is considered a favorable performance given the global sales disruptions caused by COVID-19.

In the second quarter, domestic smartphone shipments were estimated to be around 53 to 55 million units, about 14% lower than the previous quarter. However, the reduction in offline marketing expenses due to COVID-19 and other factors actually helped improve profitability. The smartphone market began recovering from May, and the successive launches of mid-range products like the Galaxy A series contributed positively. Increased sales of laptops and tablets due to online schooling and remote work, along with price cuts for the Galaxy Z Flip and increased official subsidies for the Galaxy S20, also supported the results. The third quarter, with anticipated releases such as the Galaxy Fold 2 and Galaxy Note 20, is expected to continue this upward trend.

Samsung Electronics IM Division Quarterly Performance (Unit: Trillion KRW)

Kim Yangjae, a researcher at KTB Investment & Securities, said, "Although quarterly smartphone shipments are estimated to have decreased to 53.7 million units, efforts to reduce costs likely resulted in operating profits that were more resilient than market expectations." Song Myungseop, a researcher at Hi Investment & Securities, analyzed, "The negative impact of COVID-19 was not significant, resulting in favorable profits."

The global smartphone market began recovering from May. According to market research firm Counterpoint Research, Samsung Electronics maintained the top spot with a 17.2% share of the global mobile phone market in May, but Huawei, backed by its Chinese market share, is aggressively pursuing with 17.1%. In April, Huawei briefly took the number one position in mobile phone market share. With shutdowns lifting in the US, Europe, India, and other regions, the global market is expected to recover from the third quarter, leading to a rebound in smartphone sales. In the first quarter, global smartphone shipments fell short of 300 million units for the first time in six years, reflecting a significant decline in consumer sentiment.

Anticipation for New Releases: Galaxy Note 20, Galaxy Fold 2, etc.

Galaxy Note20 Rendering Image

In the second half of the year, Samsung Electronics is expected to maintain its upward momentum with the release of highly anticipated products. The Galaxy Unpacked event, held online on August 5, will unveil the Galaxy Note 20, Galaxy Fold 2, and Galaxy Z Flip 5G. The Galaxy Note 20 series will be launched on the 21st of the following month, followed by the sequential release of the Fold 2 and Z Flip 5G in September.

The Galaxy Note 20 is the flagship product expected to drive smartphone replacement demand in the second half. The previous model, Galaxy Note 10, drew attention by achieving over 1.3 million pre-orders last year. Samsung Electronics aims to compensate for the Galaxy S20's underperformance, which reached only 60% of the predecessor's sales, with the Galaxy Note 20. Another anticipated product, the Galaxy Fold 2, targets the 'super premium' market. As the foldable phone market enters the mainstream phase, better sales than the initial Galaxy Fold's 500,000 units are expected.

An industry insider stated, "While the sell-in volume of smartphones sold by manufacturers to carriers and distributors was concentrated in the first half, benefiting results, the sell-out volume sold to general consumers tells a different story. Although the second half's performance will be influenced by the COVID-19 situation, overall, the upward trend is likely to continue."