Samsung had big expectations from the Galaxy S9 and Galaxy S9 Plus phones, but it appears that the Galaxy S9 sales haven’t been as good as the Korean firm expected. On Tuesday, Samsung posted a lackluster second-quarter earnings report, its slowest quarterly profit growth in more than a year, in part due to weak Galaxy S9 sales.
Slow Galaxy S9 sales – Chinese competition to blame
According to Samsung, its operating profit from the mobile business dropped 34% from the same period last year. It was Samsung’s worst drop since the first-quarter of 2017 as cheaper Chinese-made handsets gained more popularity among the buyers. The Korean firm blamed higher marketing expenses and disappointing Galaxy S9 sales for the weak mobile performance.
Samsung described the Galaxy S9 sales as “slow.” The Galaxy S9 handsets started selling at the end of the last quarter.
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“Amid the stagnant high-end smartphone market, the IT & Mobile Communications Division reported a drop in earnings, both year-on-year and quarter-on-quarter, over slow sales of the Galaxy S9,” the company said in a press release.
A few weeks back, analysts also predicted that the Galaxy S9 would be the worst-selling Galaxy S phone after the Galaxy S3 in 2012. Two Chinese handset makers – namely Xiaomi and Huawei – emerged as major rivals for Samsung mobiles in China and India. Huawei, on Tuesday, posted a 15% jump in revenue for the first half of the year. The Chinese company did not give the smartphone numbers separately.
Apple is also scheduled to report its earnings today. The iPhone maker is expected to post a rise in the revenue and profit on the back of decent iPhone sales even during times of slow growth for the global smartphone market. Apple’s earnings will make it clearer if Samsung is to be blamed for the less than expected Galaxy S9 sales, or if it is due to the industry slowdown.
Nevertheless, recent data from market tracker Counterpoint Research claims that Apple’s iPhone 8 has beaten Samsung’s latest Galaxy 9 Plus to become the top-selling smartphone globally.
Plans to boost mobile business
Moreover, the Korean company does not expect a quick turnaround in the mobile business owing to the rising competition. Also, there are concerns that high-end Samsung phones lack the innovation needed to push sales ahead. To boost the sales, the Korean firm plans to launch the “new Galaxy Note earlier than usual.” Samsung is scheduled to release the new Note series early next month.
Also, Samsung is now pinning its hopes on the foldable phones, which the company believes could be the next big thing in the smartphone world. Just last week, the company announced that its unbreakable, bendable screen is now through with the U.S. safety testing, which is seen as a major approval for bringing a new tech to the market.
“We are hoping that such adoption will serve as a catalyst in the stagnated mobile market,” Samsung’s mobile business VP, KyeongTae Lee, told analysts.
Chip business shines again
Samsung Galaxy S9 sales might have missed the target, but Samsung’s semiconductor business continues to outperform. According to the company, its second-quarter operating profit for the chips segment jumped 45% year-over-year. Further, the Korean firm expects robust demand for its chips in the second half of the year as well due to rising demand from the high-density data centers.
“Chips remain the goose that lays golden eggs for Samsung, but golden days may be over for its smartphones,” Claire Kim, an analyst at Seoul’s Daishin Securities, told Bloomberg.
Samsung is also building on its capacity to produce more memory chips and smartphones. In 2017, the company announced an investment of 20 trillion Won to boost its chip business in North Korea. Also, recently, the Korean firm inaugurated the world’s biggest smartphone factory in India.
However, in China, which is the biggest semiconductor market, Samsung and two other companies – Hynix and Micron Technology – are facing an investigation over price-fixing allegations. The three firms together control over 90% of the dynamic random access memory, or DRAM, chips market.
Samsung’s display business was also a letdown owing to “weak demand” for flexible OLED panels which are in products like the iPhone X, and LCD shipments disappointing in both price and volume. Samsung, however, expects the OLED demand to recover in the second-half of the year with possible help from new OLED iPhone models.