Samsung Electronics' Smartphone Division Performs Well in Q3... "Over 300 Million Units Expected to be Sold Next Year"

Estimated Operating Profit of IM Division in Q3 at 4.52 Trillion KRW
Daishin Securities Forecasts Profit Increase for Samsung Electronics Parts Suppliers

[Asia Economy Reporter Minji Lee] There is a forecast that Samsung Electronics' smartphone sales could increase by next year. The smartphone business division (IM) is estimated to have recorded strong performance in the third quarter, and it is expected to sell more than 300 million smartphones next year as well.

According to Daishin Securities on the 11th, Samsung Electronics' IM division is estimated to have recorded the highest operating profit in the third quarter. Smartphone sales are estimated at 79.78 million units, a 47.6% increase compared to the previous quarter. This is believed to be the highest level since the third quarter of 2017 (82.54 million units).

On the 8th, Samsung Electronics announced that its consolidated operating profit for the third quarter of this year was tentatively estimated at 12.3 trillion KRW, a 58.1% increase compared to the same period last year. The photo shows the Samsung Electronics building PR center in Seocho-gu, Seoul. Sales increased by 6.45% to 66 trillion KRW compared to the same period last year. Photo by Hyunmin Kim kimhyun81@

Tablet PC sales are also expected to have exceeded 10 million units for the first time on a quarterly basis. Due to the increase in set (finished product) sales, the IM division's revenue in the third quarter is expected to have increased by 48% compared to the previous quarter. Operating profit is estimated to have reached 4.52 trillion KRW, marking a return to the 4 trillion KRW level since the second quarter of 2017 (4.06 trillion KRW).

The strong performance is analyzed to be influenced by the launch of the Galaxy Note20 and Galaxy Fold2, which raised the average selling price (ASP) by 2% compared to the previous quarter. Additionally, the increase in sales of budget models (Galaxy A series) is estimated to have significantly boosted overall revenue. Kangho Park, a researcher at Daishin Securities, explained, “Marketing costs decreased more than expected due to expanded online sales and eased competition, further improving the margin rate. Cost competitiveness improved due to a reduction in the total number of models and parts standardization, and Samsung benefited from the U.S. sanctions on Huawei and trade disputes between India and China.”

The expected annual smartphone sales volume for next year is projected to be 300 million units, a 14.3% increase compared to this year. It is forecasted to return to the 300 million unit level since 2017 (315 million units). The Huawei issue is interpreted as a long-term factor and is seen as an opportunity for Samsung Electronics to increase sales volume. In advanced markets, replacement demand is expected to arise as consumers switch to 5G phones and foldable phones, while in emerging markets, Samsung is expected to increase its market share.

However, expanding global market share is expected to be difficult. Researcher Kangho Park stated, “Chinese smartphone companies such as Xiaomi, Oppo, and Vivo are unlikely to expand further considering their market share expansion within China. In emerging markets excluding China, the possibility of price competition is low considering the benefits Huawei gains.”

Samsung Electronics plans to focus on expanding the foldable phone market in the second half of next year and build a diverse lineup to secure the ultra-premium segment. There is also speculation that the Galaxy Note may be integrated into the Galaxy S21. While Apple is expected to release a foldable phone in 2023, Samsung views next year as the period to transition to foldable phones in order to secure market leadership.

The Galaxy A series plans to actively respond to diverse market demands by differentiating hardware offerings between high-end and budget models. Premium models will add optical image stabilization (OIS) and zoom functions, while budget models will focus on securing price competitiveness.

Researcher Kangho Park said, “Considering Samsung Electronics' strategy for next year, parts suppliers such as Wiseol and Jahwa Electronics, which supply Samsung, are expected to see increases in sales and profits due to ASP growth and higher operating rates. Since Samsung is focusing on mix changes, the pricing atmosphere for parts suppliers is expected to remain low.”