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Home / Technology / Samsung makes a lot of money with chips, but phones can fight

Samsung makes a lot of money with chips, but phones can fight



The smartphone slowdown is real.

Samsung's first quarter revenue and earnings rose, but it warned of the more difficult times in the mobile market – including a slowdown in demand for its latest handsets, the Galaxy S9 and S9 Plus.

The South Korean electronics giant reported a leap in sales of 20 percent on Wednesday and a 58 percent increase in operating profits as it benefited from strong demand for its memory chips used from phones to servers. Samsung received another boost from its flagship smartphones, which hit the market in mid-March.

But Samsung warned that second-quarter earnings in its mobile business should decline sequentially "due to stagnating sales of flagship models in weak demand and an increase in marketing spend". It warned that the display business, which counts Apple among its customers, will fight at least in the June quarter. And it has been said that while the demand for memory chips in the servers is strong, flash memory sales are hampered by a slowdown in the smartphone.


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While the storage business should remain strong in the second quarter, Samsung warned that "overall growth in total profit across the enterprise is challenging due to the weakness of the display panel segment and the decline in profitability in China will represent the mobile business with increasing competition in the high-end segment. "

To increase Samsung Galaxy S9 and S9 Plus, Samsung plans to expand its" theme stores ", cooperation with partners and the sequel of advertising programs like trade-ins. That could mean many upcoming discounts on Samsung's eye-catching new gear. The company also announced that it will launch a new flagship model – presumably the 9 mark – in the second half of the year and will continue to invest in its Bixby Language Assistant to create a seamless multi-device -Enjoyment for consumers. "

The smartphone market has slowed down in recent quarters, making it harder for mobile phone providers to make major changes to their devices and distinguish themselves from one another, with prices for the latest and largest cell phones increasing at the same time According to market researcher Gartner smartphone sales fell for the first time in the fourth quarter.

Samsung and its main competitor, Apple, have sold out were not immune Apple, which released its quarterly results next week, is expected to report weak demand for the iPhone X. This includes Samsung, which supplies the smartphone's OLED displays.

But Samsung, its Galaxy S9 and S9 Plus earlier than normal has introduced to get a sales boost, the impact of a mobile slowdown does not like it feel very like Apple. Apple generates about two-thirds of its sales with the iPhone, and it is believed that most of its profits come from the smartphone. Samsung's mobile and components business accounts for nearly half of its revenue, but most of its revenue – around 75 percent in the first quarter – comes from its chip business.

"The reality is that the diversified Samsung conglomerate has massively reduced its dependence on smart phones – unlike Apple," said Forrester analyst Frank Gillett. "The main business driver is the memory chip component business – and new opportunities in software, connected devices, and AI / IOT platforms."

Chip Boost

Samsung is known as the world's largest phone and TV manufacturer, but it also sells more memory chips than any other company on the planet. This has further boosted Samsung's results as the TV market stagnates and the mobile market matures. Last year, Samsung was the largest semiconductor manufacturer in the world in terms of revenue and beat long-term leader Intel.

Samsung's storage revenues increased 43 percent to 17.3 trillion won ($ 16 billion) during the quarter. Total semiconductor sales increased 33 percent to 20.8 trillion won.

According to Samsung, the business benefited from strong demand for memory chips in servers and graphics products. Semiconductor business benefited from strong demand for semiconductors for smartphones and cryptocurrency.

Along with flash memory and DRAM, Samsung builds processors that act as brains of devices, and manufactures displays and various other components. It not only uses components it builds in its own devices, but also sells them to customers like Apple.

It was Apple that had worried some analysts about Samsung's results. The iPhone X uses Samsung OLED displays, and many market observers believe that Apple has not sold as many devices as hoped.

Samsung said Wednesday that profits in its display business would be hampered by slow demand for flexible OLED panels and increased competition between rigid OLEDs and more traditional LCD displays. (Flexible OLED displays let smartphone manufacturers curve the screens of their devices like the Galaxy S9). It warned that demand for OLEDs should remain weak in the second quarter.

The OLED business should recover in the second half, Samsung said. This is probably due to the expected new iPhones from Apple, which will use the technology.

Mobile Slowdown

Samsung's latest handsets, the Galaxy S9 and the S9 Plus, contained relatively small improvements from their predecessors, but contributed to a major leap in the company's mobile business in the first quarter. Sales climbed 23 percent year-over-year to $ 22.5 trillion ($ 20.8 billion).

"The Galaxy S9's early launch and solid sales of the Galaxy S8 smartphones led to significant earnings growth," said Samsung.

But the similarity of Galaxy S9 and S9 Plus to their old predecessors could hurt the demand for the newer devices. Market research firm Canalys estimated that Samsung shipped just over 8 million Galaxy S9 and S9 Plus units in the first four weeks after launch. This is about the same as last year's sales of Galaxy S8, but the Galaxy S7 of 2016.

"The novelty of premium smartphones is losing," said Canalys analyst TuanAnh Nguyen.

Overall, Samsung reported revenues of $ 60.6 trillion ($ 50.6 billion) and an operating profit of $ 15.6 trillion ($ 14.4 billion). Earlier this month, the company said it expects its sales to reach $ 60 trillion ($ 55 billion). It also said its operating income increased 58 percent to 15.6 trillion won (14.7 billion dollars).

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