Samsung Electronics 2Q Mobile Performance Holds Up... Expecting Earnings Improvement with New Products in Second Half

[Asia Economy Reporter Eunmo Koo] Samsung Electronics' Mobile (IM) Division posted an operating profit of over 3.2 trillion KRW in the second quarter. Although operating profit decreased by more than 1 trillion KRW compared to the previous quarter due to a decline in new product effects and production disruptions caused by COVID-19, the performance is considered to have held up well. In the third quarter, performance improvement is expected with the launch of new products such as the next-generation foldable smartphone ‘Galaxy Z’ series.

On the 29th, Samsung Electronics announced that in the second quarter of this year, the IM division recorded sales of 22.67 trillion KRW and an operating profit of 3.24 trillion KRW. Compared to the second quarter of last year (sales of 20.75 trillion KRW, operating profit of 1.95 trillion KRW), these figures represent increases of 9.3% and 66.2%, respectively. However, compared to the previous quarter, sales and operating profit decreased by 22% and 26%, respectively.

The mobile market in the second quarter was characterized by a seasonal off-peak period, and the market contracted compared to the first quarter due to the resurgence of COVID-19. Smartphone sales dropped by more than 20% from the previous quarter as demand decreased in countries such as India, and production disruptions at the Vietnam factory caused smartphone shipments to fall from 76 million units in the first quarter to about 60 million units in the second quarter. Additionally, supply shortages of application processors (AP) for some models are also believed to have had an impact.

In the third quarter, the effect of new products such as the upcoming foldable smartphones is expected to increase the proportion of high-end phone sales, leading to improvements in both sales and operating profit compared to the second quarter. Samsung Electronics plans to unveil a large number of new products, including the next-generation foldable phones ‘Galaxy Z Fold3’ and ‘Galaxy Z Flip3,’ the smartwatch ‘Galaxy Watch4,’ and wireless earbuds ‘Galaxy Buds2,’ at the Galaxy Unpacked event on the 11th of next month.

These products are expected to be priced about 20% lower than their predecessors, raising expectations for the full-scale expansion of the foldable phone market. Since the Galaxy Note series will not be released this year, this foldable phone lineup will serve as Samsung Electronics’ main models for the second half of the year.

Samsung Electronics stated, "We are preparing to launch new Galaxy Z series foldable smartphones that innovate product competitiveness and user experience," adding, "In addition to Samsung’s own innovation, we will strengthen open collaboration with partners to provide a special mobile experience."

Furthermore, Samsung plans to expand 5G adoption even to entry-level mid-range smartphones to actively respond to diverse regional demands and enhance product competitiveness by providing convenient connectivity experiences through the expanded Galaxy ecosystem, including tablets, PCs, and wearables, thereby increasing sales. Kim Unho, a researcher at IBK Investment & Securities, forecasted, "In the third quarter, mobile overseas client volumes will ramp up, and with new product launches such as foldable phones, the average selling price is expected to improve, so both sales and operating profit are anticipated to improve compared to the second quarter."