[Concall Summary] Galaxy Shows Strength... "Diversifying Foldables and 5G Phones Tailored to Regions"

88 Million Units Sold in Q3... Flagship Sales Up 50%
"Foldable Phones Are a High-Growth Category, Will Expand Price Range"
Q4 Expected to See Performance Slowdown Due to Increased Marketing Costs Amid Intensified Competition

On the 29th, when Samsung Electronics announced its confirmed third-quarter earnings, citizens were passing by in front of the Samsung Electronics PR Center in Seocho-gu, Seoul. Despite the resurgence of the novel coronavirus (COVID-19), Samsung Electronics achieved a record high with third-quarter sales approaching 67 trillion won this year. Operating profit also exceeded 10 trillion won for the first time in two years. The third-quarter operating profit was 12.3533 trillion won, an increase of 58.83% compared to the same period last year. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Han Jinju] Samsung Electronics' IM division demonstrated its strength by posting operating profits in the 4 trillion KRW range in the third quarter, driven by the launch of flagship and foldable smartphones. In the fourth quarter, sales are expected to slow down due to intensified competition following the launch of the iPhone 12. Samsung Electronics plans to expand its range of foldable smartphones at various price points and increase its 5G smartphone lineup tailored to regional characteristics.

On the 29th, Samsung Electronics reported third-quarter IM division sales of 30.49 trillion KRW and operating profit of 4.45 trillion KRW. Sales increased by 4.24% and operating profit by 52.40% compared to the same period last year.

Samsung Phones Sold 31 Million More Than in Q2

Third-quarter smartphone shipments far exceeded market expectations (80 million units), reminiscent of the smartphone boom era. Samsung Electronics sold 88 million smartphones and 9 million tablets in the third quarter. This represents an increase of 31 million smartphones and 2 million tablets compared to the second quarter. The sales growth was influenced by a 50% increase in sales of flagship models such as the Galaxy Note20 and Galaxy Z Fold2 compared to the previous quarter.

Lee Jong-min, Executive Director of the Wireless Business Division, said, "Compared to the depressed second quarter due to lockdowns in major regions, the third quarter market showed a gradual recovery in demand due to economic stimulus measures, resulting in increased demand. With the launch of flagship new models like the Galaxy Note20 and Galaxy Z Fold2, and the recovery of mass model demand in many regions including India, smartphone sales significantly expanded compared to the previous quarter."

The fourth-quarter smartphone market is expected to see increased demand, but sales volume may decline due to intensified competition and increased marketing costs. Lee said, "Although demand will increase compared to the previous quarter due to the year-end peak season, smartphone sales are expected to decrease compared to the previous quarter due to seasonal factors such as the diminishing effect of flagship new model launches. Competition will intensify, and profitability in the fourth quarter will decline due to increased marketing expenses to respond to the year-end peak season."

The market outlook for next year anticipates increased demand compared to this year, but uncertainties related to COVID-19 remain. Lee said, "Thanks to the spread of 5G, mobile market demand next year is expected to increase compared to the previous year. However, it will take more time to recover to the 2019 level before COVID-19."

Accelerating Foldable Popularization and Differentiating 5G Phones by Region

Samsung Electronics is focusing on foldable and 5G smartphones as growth engines. The company aims to accelerate the popularization of foldable smartphones by launching models at various price points. Despite COVID-19, the Galaxy Z Flip and Galaxy Z Fold2 released this year have maintained steady growth.

Lee said, "Although foldable phones still do not account for a large portion of total smartphone sales, we plan to expand the operating price range and continuously strengthen the portfolio based on flexible display technology accumulated over several years. Foldable smartphone sales will increase every year."

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 won, an increase of 58.1% 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 won compared to the same period last year. Photo by Kim Hyun-min kimhyun81@

While the downward strategy for 5G smartphones continues, Samsung Electronics plans to expand its 5G smartphone lineup tailored to regional characteristics. According to market research firm Canalys, smartphone shipments next year are expected to reach 544 million units, double this year's 278 million units. Starting next year, the launch of Apple's first 5G smartphone, the iPhone 12, will intensify the three-way competition among Huawei, Apple, and Samsung.

Lee explained, "Based on the 5G capabilities we have built so far, we will expand our portfolio and operate lineups tailored to regional characteristics to broaden customer choices. We will also expand strategic partnerships with global top-tier companies to provide 5G specialized services and increase sales."

Samsung is expanding its network business through new 5G communication equipment orders from Verizon in the United States. Lee said, "We will actively promote 5G equipment business in Japan, Europe, India, and other regions to strengthen our global business foundation. We will expand supply of 5G core equipment with differentiated technology compared to competitors and strengthen cooperation with partners who have continuous in-house R&D investment and technology to establish technological differentiation and a stable supply system."