Samsung announces another record quarter result, but profit from mobile business declines

Samsung says smartphone business will return to profit this year with the launch of new products including Galaxy S9.

  • Published: February 1, 2018 9:51 AM IST
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Samsung is widely known for its smartphones and other consumer electronics devices including televisions and home appliances. However, the company’s primary source revenue continues to be its memory division and chip business.

Samsung announced another record quarterly profit in its fourth quarter earnings for 2017 with its chip division performing better than industry expectations. The strong sales from the chip business also overshadowed the fact that Samsung’s mobile division registered a year-over-year decline of 3.2 percent in profit.

With the release of earnings for the fourth quarter, Samsung has now reported record results for the third straight quarter. The South Korean company has been in a phase of transition since the late 2016 recall of Galaxy Note 7 and the five year jail sentencing of its chief Jay Lee. Despite the controversies, the company has continued to maintain a robust growth in different business verticals.

In Q4, Samsung said its profits were up 42 percent from the previous year when it was struggling with Galaxy Note 7 recall. The revenue for the period ending December 2017 were up 23.7 percent. While it did not provide sales numbers, the company noted that the total smartphone shipments decreased “due to the lineup optimization of low-end models.”

It added that the shipment of flagship products like the Galaxy Note 8 increased from the previous without offering exact sales number. The decline in profit from smartphone business comes just weeks ahead of the launch of Galaxy S9 and Galaxy S9+.

Samsung is the undisputed market leader in the global smartphone market selling a wide range of smartphones across different price segment. But the Korean giant does not draw as much profit as the second-placed Apple. Samsung has little or no presence in China, the largest smartphone market while dominance in India is being threatened by the likes of Xiaomi.

Samsung seems to be focusing more on its premium smartphones like the Galaxy S8 and Galaxy Note 8 putting more emphasis on the upcoming Galaxy S9 launch. According to leaks, the Galaxy S9 and S9+ will be a minor improvement over Galaxy S8 with the design remaining same as existing models and the smartphone offering improved hardware internals and camera setup.

Samsung is leaning on the sales on its flagships to drive the mobile business going forward. “In the first quarter, the company expects the mobile business to improve its earnings, led by an increase in sales of flagship products with the launch of Galaxy S9,” the company said in its earnings release.

Samsung also envisioned the future of its smartphone business which will rely on development in foldable OLED displays needed to launch foldable smartphone. “Samsung will continue its efforts to differentiate its smartphones by adopting cutting-edge technologies, such as foldable OLED displays. It will also drive forward new businesses related to AI/IoT by strengthening the ecosystem based on Bixby and building on Samsung’s 5G technology.”

The demographic of smartphone business has changed dramatically in the past year with mid-range premium smartphones offering more value over premium flagship smartphones. There are even reports of Apple cutting production of its iPhone X model. Samsung says demand for smartphones will rise this year “thanks to growing replacement demand for premium smartphones.”

It remains to be seen whether Samsung regains its lost market share from Xiaomi in India, one of the fastest growing smartphone market. Also whether the company makes a headwind against companies like Huawei, Oppo and Vivo in China.

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  • Published Date: February 1, 2018 9:51 AM IST