Samsung’s revenue from its mobile business decreased in the opening quarter of 2017 due to a decline in flagship product sales, but the company predicted the division would rebound through the remainder of the year.
The vendor noted a price adjustment to its Galaxy S7 and S7 Edge impacted revenue and profit at the mobile unit during Q1, offsetting a slight increase in shipments.
It said its Q1 mobile earnings were also affected by the later than usual launch of its latest flagship, the Galaxy S8.
The vendor traditionally unveils new flagship models during Mobile World Congress and launches the units towards the end of the first quarter, meaning they offer some uplift to shipments and earnings. However, for the Galaxy S8, Samsung opted to unveil the model on 29 March, with shipments commencing late April.
In mid-April Samsung said demand for the S8 beat expectations, with orders in the first seven days exceeding those of the S7.
Despite the decline in earnings, Kyeong-Tae Lee, VP of Samsung’s mobile communications business, said the slight increase in smartphone shipments during the quarter were due to strong sales of the Galaxy A 2017 edition (released in January), and continued strength for mass-market smartphones in emerging markets, which offset weak seasonal demand in the first quarter of the year.
The company was bullish its mobile revenues would rebound in the second quarter, as sales of the Galaxy S8 begin to bear fruit and help it to offset a predicted intensification in competition in the second half of 2017. Samsung also plans to launch another flagship during the back half, and also beef up its portfolio in the mid- to low-end segment.
Samsung’s chip business was the main driver of a 46 per cent year-on-year rise in overall net profit during Q1 to KRW7.68 trillion ($6.61 billion). In early April Samsung forecast a near 50 per cent jump in its Q1 operating profit.
Overall revenue rose 2 per cent to KRW50.55 trillion, with mixed results across its three main business units.
While its semiconductor unit’s revenue increased 40 per cent to KRW15.66 trillion, mobile communications revenue dropped 17 per cent to KRW22.47 trillion.
The South Korea-headquartered company said earnings for its IT & Mobile Communications division decreased due to a decline in S7 shipments and lower prices for the S7 lineup. Operating profit for the division fell 46 per cent to KRW2.07 trillion during the quarter.
Handset sales reached 93 million units in Q1, with smartphones accounting for about 85 per cent of the total. Blended average selling price (ASP) was in the mid-$170s.
Lee forecast global demand for smartphones and tablets to remain flat in Q2, with sales of both remaining at a similar level to Q1. Samsung expects blended ASP to increase slightly and smartphones to account for nearly 90 per cent of handset sales. Combined with strong sale of its newest flagship, the company expects an increase in revenue and operating profit in Q2.