Samsung reports weakest profits in two years

Samsung today announced its 2019 first-quarter earnings and the numbers don’t look good: operating profits fell to $5.4 billion, a 60 percent decline marking the weakest results since late 2016 and a far cry from the $13.4 billion in operating profits it captured in the year-ago quarter.

The company’s quarterly revenue dipped by nearly fourteen percent despite “solid sales” of its latest Galaxy S10 premium smartphone range. According to the South Korean chaebol, profitability in its mobile division declined annual due to intensified competition in the low- to mid-range segment and softer demand in the overall smartphone market.

Samsung’s slidedeck can be found in its website.

Growth in smartphone shipments was limited as sales of previous models fell due to a lineup reorganization of mid- to low-end products. Increased expenses from adoption of high-end features, marketing and the lineup revamp pressured profitability.

The company shipped an estimated 78 million handsets and about five million tablets overall during the quarter. Its profitable semiconductor business suffered a major 64 percent decline.

Samsung now expects “limited improvement” in memory chips, its true bread and butter, saying demand will likely begin to improve for mobile products but price declines will likely continue. Its display business lost nearly half a billion dollars ($480 million) due to “decreased demand for flexible displays and increasing market supplies for large displays.”

Samsung, of course, suffered a major blow recently when reviewers and teardown experts discovered major design flaws with its very first foldable smartphone, dubbed Galaxy Fold, which was supposed to be a showcase for its display-making arm, Samsung Display, which has been researching flexible OLED panels for years now.

For displays, Samsung now expects “higher demand for rigid panels” but adds that demand for flexible screens is set to rise “on new smartphone launches.”

The company thinks its smartphone business will rise again.

For the second half, despite intensified market competition, Samsung expects smartphone sales to increase led by new models in all segments from the Galaxy A series to Galaxy Note amid strong seasonality.

In the premium segment, the company will strengthen its leadership through the new Galaxy Note as well as its innovative products such as 5G and foldable smartphones.

Samsung hasn’t given up on the beleaguered Fold after all. In fact, there’s “no change” in the company’s push toward foldable phones, as per its Vice President of Mobile, Lee Jong-min. 

“Samsung Electronics have been preparing Galaxy Fold for a long period and there’s no change to our direction to provide premium experiences for customers desiring innovation,” Lee told Reuters, reiterating the company will find the reason behind the problems with the display. 

Apple’s earnings are due later today at 2pm PT, 5pm ET.