Samsung Electronics is expected to report its smallest profit growth in more than a year when it announces its second-quarter results this week, as lackluster sales of premium Galaxy smartphones overshadow the firm’s highly profitable chip business, Reuters reports.
The Korean electronics giant’s smartphone sales are likely to have dropped in the April-June quarter, following a more than 2 percent decline in the previous three months as consumers flock to cheaper models from Chinese rivals, the report said, citing analysts.
Samsung’s Galaxy S9 flagship phone, launched in mid-March, is on track to sell less in its launch year than its predecessor Galaxy S8 series sold in 2017 after its debut, according to the report.
This is expected to drag on profit growth.
Analysts expect an operating profit of 14.9 trillion won (US$13.3 billion) for the three months to June, up 5.7 percent from a year earlier but less than the record 15.6 trillion won it posted in the March quarter, according to a Thomson Reuters poll.
Some investors are skeptical whether Samsung’s upcoming line-up of foldable phones with sleek OLED screens will be innovative enough to gain traction with customers. The new Galaxy Note will debut on August 9 in New York.
“Samsung has to show something that will change the paradigm,” Park Jung-hoon, a fund manager at HDC Asset Management, told Reuters.
“Market watchers don’t have high expectations for its smartphone business at the moment, when Chinese players have already caught up in technology and ideas.”
In China, the world’s biggest smartphone market, Samsung’s market share was just 1.3 percent in the first quarter, according to data from research firm Strategy Analytics.
Chinese smartphone makers – Huawei, Oppo, Vivo and Xiaomi – held the top spots in China, while Apple was the only foreign firm in the top five.
In India, Xiaomi displaced Samsung as market leader last year and continued to lead in the world’s second-biggest smartphone market in the first quarter.
Samsung’s challenges in the mobile segment are overshadowing the success of its chips business, which generates about three quarters of the firm’s operating profit and about a third of its revenue.
Operating profit in the semiconductor business is expected to grow about 50 percent to a record 12.5 trillion won in the second quarter from a year ago.
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