Samsung’s IT and mobile communications division suffered a sharp decline in second quarter revenue due to lower than expected sales of the Galaxy S9 and S9 Plus in a stagnant high-end smartphone market.
Weak smartphone sales led to the unit posting a 20 per cent year-on-year drop in revenue to KRW24 trillion ($21.3 billion).
Lee Kyeong-tae Lee, VP of the mobile communications business, added in an earnings call the average selling price (ASP) of smartphones declined in Q2 as demand increased for midrange and low-end models. He said operating profit also decreased significantly in the quarter as marketing costs as a percentage of total revenue increased as it intensified its marketing activities amid rising competition among flagship models.
Looking ahead to the second half, Lee said the business environment will remain challenging as competition increases, with rivals releasing models with higher specifications and lower prices. In response, he said it aims to expand sales of flagship models by introducing a new Galaxy Note earlier than usual (due for unveiling next week) and “strengthen price competitiveness and adopt advanced technology in mass market models to aggressively respond to market conditions”.
Its mobile network unit reported improved earnings due to increased investments in LTE by major overseas customers and expects to supply 5G network to major mobile operators. The vendor was selected to supply network gear for Verizon’s commercial fixed wireless access 5G launch in Houston, Texas and Sacramento, California.
On a group basis, the electronics giant’s net profit for the quarter was marginally lower from a year ago at KRW11.04 trillion due to higher income tax on total revenue of KRW58.5 trillion, which was down 4 per cent from Q2 2017.
The semiconductor division posted a 25 per cent increase in revenue to KRW22 trillion, while the consumer electronics unit’s revenue fell 4 per cent to KRW10.4 trillion. It expects market conditions for its memory business to remain solid in H2 on the back of strong global demand.