SEOUL, July 31 — Samsung Electronics Co’s net income fell short of analysts’ estimates as slowing growth in the global smartphone market hits demand for its Galaxy devices, while Chinese rivals step up competition to supply displays.
Net income rose to 11 trillion won (RM40 billion) in the three months ended June, the Suwon, South Korea-based company said in a filing today. That compares with the 11.6 trillion won average of estimates compiled by Bloomberg.
The earnings results reflect Samsung’s troubles in shoring up its mobile business even as the company enjoys resilient sales of memory chips. Phone makers including Huawei Technologies Co and Oppo are increasing their global market share as Chinese display makers threaten the South Korean company with products ranging from cheaper televisions to state-of-the-art smartphone screens.
“The elongation of the upgrade cycle led customers to hold onto their phones in the U.S,” said Cliff Maldonado, an analyst at BayStreet Research in San Francisco. “In Europe, Huawei is gaining a tremendous amount of share mostly at Samsung’s expense. So they have a very aggressive Huawei to deal with.”
Operating profit was 14.9 trillion won on sales of 58.5 trillion won, Samsung said, confirming preliminary numbers released earlier this month.
In China, the biggest market for semiconductors, Samsung faces an investigation over allegations of collusion in chip business along with SK Hynix Inc and Micron Technology Inc. The three companies control more than 90 per cent of the market for dynamic random access memory, or DRAM, chips.
Operating income from the chip unit amounted to 11.6 trillion won, accounting for the lion’s share of profit.
Contract prices for 32-gigabyte DRAM server modules climbed 2.8 per cent in the June quarter from the March period, which saw them rise 5.6 per cent. Prices for 128 gigabit MLC NAND flash memory chips fell about 9 per cent, according to inSpectrum Tech Inc.
Samsung shares fell less than 1 percent after the results. The stock has declined about 9 percent this year after trading near record highs in 2017 when the world’s biggest chipmaker posted record profit on demand for semiconductors used in everything from data servers to smartphones.
Display panels make up another part of revenue for Samsung, which supplies OLED screens to Apple Inc. for its iPhone X even as the two sides compete in the premium phone market. Samsung’s operating profit from its display business was 140 billion won, down from 1.7 trillion won a year earlier.
With growing competition from China, Samsung’s smartphone division posted 2.7 trillion won in operating profit, down from 4.1 trillion won a year earlier. After a decade of growth, the global phone market is slowing as consumers wait for the next level of innovation such as bendable-screen phones and devices for fifth-generation wireless networks.
“Even those wanting to own the latest and greatest are having difficulties paying high-margin prices for performance and features that have topped out,” said Paul Swiercz, a management professor at George Washington University. “Consumers are losing the belief that the next version of a smartphone is actually smarter.”
Samsung’s consumer electronics unit, which includes TVs and appliances, had profit of 510 billion won.
Samsung benefited in the second-quarter from a depreciation of the South Korean won on fears of a trade war between China and the US, two of its biggest export destinations. Samsung said earlier this year that one of its biggest obstacles for business would be global protectionism, warning its employees to brace for potential implications.
The company at the same time is expanding its ability to produce memory chips and smartphones. Samsung last year announced 20 trillion won of new investments to increase chip output in South Korea and this year completed building the world’s largest smartphone factory in India.
Vice chairman Jay Y. Lee, who has led the company since his father Lee Kun-hee fell ill in 2014, oversaw the opening of the factory, which South Korean President Moon Jae-in and Indian Prime Minister Narendra Modi also attended.
Lee was released from prison in February on a suspended sentence for a bribery conviction in connection with a national influence-peddling scandal that led to the ouster of Moon’s predecessor Park Geun-hye.
Under Moon, who has pledged to get tough on chaebol, Lee faces a set of regulatory issues, including dissolving a complex web of cross-holdings that has helped his family stay in control of Samsung Electronics and its array of affiliates. — Bloomberg
Source: The Malay Mail Online