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Home / Business / Samsung Elec's earnings growth slows as Galaxy S9 misses sales targets

Samsung Elec's earnings growth slows as Galaxy S9 misses sales targets



SEOUL (Reuters) – Samsung Electronics Co Ltd ( 005930.KS ) posted its slowest quarterly earnings growth in more than a year on Tuesday as its Galaxy S9 device missed sales targets and the competition heated itself casting Doubts about his leadership of the smartphone market.

FILE PHOTO: The Samsung Electronics logo can be seen in its office building in Seoul, South Korea, August 25, 201

7. REUTERS / Kim Hong-Ji / Archive Photo

The Apple Inc. ( AAPL.O ) The automotive supplier and smartphone rival reported that the operating income of the mobile business has been the steepest rate of decline since the first quarter of 2017 cheaper mobile phones in China weighed on margins.

The South Korean technology giant gave investors little reason to hope for a quick turnaround in the wireless business and freaked out tougher competition in the second half of the year as premium phones offered no innovation to drive revenue growth.

"Samsung has already lost to China in price competition and is threatened by Chinese models in terms of design and hardware strength," said Park Jung-hoon, a fund manager at HDC Asset Management, which owns Samsung's stock.

"It's not an easy game for Samsung unless it really meets the needs of consumers for new smartphones."

Higher marketing spending and the disappointing performance of the S9 flagship, which missed the sales target, weighed on mobile performance, Samsung said.

Samsung hopes for foldable phones to become the next big thing. His screen production unit said last week that his unbreakable, pliable screen passed the US security tests, a key step in bringing foldable phones to market.

"We hope that this launch will serve as a catalyst for the stagnating mobile market," said KyeongTae Lee, vice president of Samsung's mobile business, to analysts.

In the near future, Samsung said competition will intensify in the second half as new smartphone models are released, prompting it to introduce a new Galaxy Note earlier than usual. Samsung will release a new note early next month.

The mobile business posted a 34 percent drop in operating profit to 2.7 trillion won ($ 2.4 billion) in the second quarter. The biggest decline since the Galaxy S7 was Samsung's flagship early last year.

It remains to be seen whether Samsung's difficulties in the mobile business, which account for around 40 percent of its revenue, are attributable to its own mistakes or reflect the economic downturn in the industry. Apple expects sales and earnings to increase for the third quarter on Tuesday, helped by robust sales of its iPhones.

China's Huawei Technologies [HWT.UL] the third largest smartphone maker in the world, recorded its weakest growth since the first half of 2013 on Tuesday.

CHIPS ARE UP

The world's largest chip and smartphone maker Operating income soared in the second quarter, 5.7 percent to 14.9 trillion won (13.3 billion US dollars), slightly above the estimate of 14.8 trillion won.

Sales in the period from April to June fell 4 percent to 58.5 trillion won.

Samsung shares slipped 0.3% at 0620 GMT, compared to the flatter broader .KS11 market.

While the mobile business is struggling, the chip business remained Samsung's main revenue maker in the second quarter as sales to the cloud computing and crypto currency industries supported the DRAM chip industry even as the NAND flash memory prices fell.

The chip unit achieved a record profit of 11.6 trillion won in the second quarter, an increase of 45 percent over the previous year and almost 80 percent of total operating income.

Samsung said demand for DRAM chips, its main storage product, will remain strong in the second half of the year thanks to the growth of server data centers used for cloud computing.

This view reflected the forecast by South Korean competitor SK Hynix Inc. ( 000660.KS ) last week of solid DRAM chip sales for the rest of the year, comments likely to raise investor concerns over an unprecedented Two-year The boom in the chip business is nearing a quick end.

coverage by Ju-min Park and Heekyong Yang; Editing by Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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