Samsung profits driven by iPhone XS components, smartphone earnings plummeting
Malcolm Owen
Samsung advises it will be reporting record operating profits in its upcoming quarterly results, but while seemingly a return to form for the South Korean giant, its earnings boost is partly due to supplying Apple OLED displays for the iPhone XS range.
Earnings guidance from Samsung Electronics released on Friday advise the company made a consolidated operating profit of approximately 17.5 trillion won ($15.5 billion) from consolidated sales of 65 trillion won ($57.6 billion) in the third quarter, making it Samsung's highest quarterly earnings on record. A full breakdown of the results has yet to be released, but is expected by the end of October.
Despite the lack of detail from Samsung, analysts advised CNN the year-on-year operating profit increase of approximately 20 percent is probably due to Samsung's stronger sales in its components business. SK Kim of Daiwa Capital Markets believes the high sales of memory chips, as well as higher earnings in Samsung's display business will have contributed significantly to the figure.
As the main supplier of OLED panels to Apple for its iPhone XS and iPhone XS Max, alongside LG Display, Kim suggests the high margins for the components certainly helped with revenue. Apple is thought to account for 25 to 30 percent of sales for Samsung's display business, with the unit estimated to have generated approximately 10 percent of Samsung's overall 54 trillion won ($48 billion) profit for last year.
While memory sales are said to have helped Samsung achieve record profits over the last year, there is some concern about slowing demand for memory chips, as well as a subsequent price reduction for the components. Analysts have warned about a potential downturn for memory, but it seemingly has yet to impact Samsung's revenue streams.
Once a major revenue source for Samsung, the company's smartphone arm is expected to report disappointing smartphone sales in the third quarter. Canalys analyst TuanAnh Nguyen suggests Samsung is suffering a "slowdown in many markets" for its mobile devices compared to last year, despite recently launching the flagship Galaxy Note 9.
Over the summer, Samsung revealed a 22-percent drop in its mobile revenues, despite shipping 83 percent more smartphones in the second quarter. While Samsung shipped 71.5 million units in Q2 2018 compared to Apple's 41.3 million iPhones, Samsung reported it had earned less than half the revenue of iPhone sales during the period.
While its smartphone business is thought to be dragging down revenue, an unexpected source has apparently helped prop up revenue. Analyst Kim believes a hot South Korean summer helped increase sales of air conditioning units from Samsung's consumer electronics division.
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13 Comments
Samsung has peaked. Fewer leaks under Cook appears to have killed their R&D.
All the smartphone reviewers say Samsung flagship smartphones are much better than Apple's iPhones. Samsung smartphones are said to have far more features at a much cheaper cost. Also, Samsung has a better selection of smartphones to choose from. At least that's what 99% of Youtubers have to say about Samsung smartphones. This year, the iPhone is suffering from Beautygate, Chargegate and Connectivitygate. Not even one Android flagship smartphone seems to have any problems at all or they're not being reported on the internet as such. There's the omnipresent complaint about iPhones not coming with fast chargers in the box despite their exorbitant price. No freaking headphone jack and the ugly display notch just about completes the reasons why iPhones are said to be inferior to all the Samsung offerings.
This year the iPhone is said to be TOO expensive for the consumer masses and supposedly no one is going to buy iPhones because they all believe Apple is just ripping-off consumers. So, with all that being said, I'm surprised Samsung smartphone sales are falling off. It just runs counter to what all the reviewers are saying. Apple's iPhone should clearly be losing the battle. Heck, Samsung is beating the pants off of Apple in terms total smartphone shipments. Apple appears to be doomed this year. Smartphone reviewers are never wrong.
/s
Same old, same old. Only iPhones seem to have problems and that's just downright unlikely.