Samsung’s Mobile Communication Division Declines in Revenue and Earnings Even as Smartphone Shipments Increase in Q3 2017
Samsung Electronics has announced financial results for Q3 2017, which ended on September 30, 2017. The company’s revenue for the quarter was KRW 22.05 trillion ($55 billion), which increased by KRW 14.03 trillion ($12 billion) year-on-year. The operating profit for the quarter was a record KRW 14.53 trillion ($13 billion), which increased by KRW 9.33 trillion ($8.3 billion) year-on-year.
This record result for Samsung Electronics was because of several factors. The major ones were high demand for flagship mobile devices and memory chips for servers. In particular, Samsung Electronics posted exceptional financial results for its semiconductor businesses, which includes NAND, DRAM, OLED displays, System LSI business (mobile processors) and Foundry businesses.
However, the IT & Mobile Communications Division posted KRW 27.69 trillion ($24.9 billion) in consolidated revenue and KRW 3.29 trillion ($2.95 billion) in operating profit for the quarter. This meant that overall revenue and earnings for the division decreased quarter-on-quarter. Samsung stated that this was because mid-to-low tier models of Samsung’s smartphone portfolio had a higher sales portion this quarter than they did in previous quarters.
It is worth noting that the company’s smartphone shipments increased on the back of the global availability of their flagship Galaxy Note 8, which launched globally on September 15, 2017. Shipments also had a helping hand from the solid performance of the new Galaxy J 2017 series.
In the last few quarters, the Mobile Communications division has posted excellent financial results thanks to the great reception of its 2017 flagships, the Galaxy S8 and the Galaxy S8+. Thus, the company has recovered well from the Galaxy Note 7 recall, and early estimates for sales of the Galaxy Note 8 are looking promising.
Samsung has estimated that both smartphone and tablet demands are likely to increase during the year-end peak season. The company expects competition to intensify in the premium segment. To keep its competitive advantage, Samsung plans to “focus on maintaining solid sales and profit quarter-on-quarter through increased shipment of flagship models”, that is, a greater proportion of flagship smartphones in Samsung’s overall smartphone sales.
With respect to the the outlook for 2018, Samsung expects smartphone market to recover in terms of growth, but with the qualifier that the difficult business environment for the company is likely to continue. This is because of intensifying competition and higher materials costs. In the high-end price segment, Samsung now has two worthy competitors: Apple and Huawei. In the mid-range segment, Chinese OEMs like Oppo and Vivo pose heavy competition in China and India. Finally, in the budget segment, the company is in danger of losing its lead in particular markets such as India because of the rise of Xiaomi.