What Next For Samsung As Profits Evaporate & Smartphone Sales Fall 15% In Last Quarter
Samsung Electronics’ left it till after their big hooray event in Seoul, for their new foldable smartphones to officially announce a major slump in smartphone sales and a 95% slump in profits.
With the launch of their new smartphones, tablets and watches pulled forward by one month, in an effort to generate improved quarterly revenue in this quarter, Samsung’s operating profit in the April-June quarter plunged 95% for the year to A$779M $523 the lowest in 14 years.
The rough earnings news came a day after their star-studded event in Seoul featuring members of K-pop supergroup BTS and other artists.
The exhibition hall was packed with over 1,000 YouTubers and other influencers and less tech media journalists, who tend to question the performance and quality of their products than influencers who were given a free ride to Seoul by Samsung’s Australian marketing department.
TM Roh, who heads the company’s smartphone division, touted Samsung’s role in driving the growth of the foldables market, after management admitted that that declining smartphone shipments were the main reason behind the slumping revenue results.
According to IDC’s latest smartphone tracker report out today Samsung smartphone sales fell 15%, in the last quarter Apple sales fell 6.3%.
The overall market was down 7.8%.
Samsung management claim that they are confident that its newly launched foldables will drive up demand and will help its mobile division back on track in this quarter.
The new Galaxy Z Fold5 and Galaxy Z Flip5, launched this week which go on sale in August, are 2-millimeters thinner than current models when folded.
The exterior display on the Z Flip5 is 3.8 times bigger than the one on the earlier model. But the price range, camera performance, memory capacity and other features are the same for the phones.
In Australia Samsung led the way in foldables and it delivered excellent growth according to Vice President of mobile Gary McGregor.
The problem now is that the Company has competition in the foldable market from the likes of Motorola and Chinese brands.
Samsung management admit room for technological innovation has already narrowed.
A big problem for Samsung Australia is that consumers are waiting longer to upgrade to new models, and room for technological innovation is shrinking year by year, making it harder for brands to deliver new innovation.
In Australia Samsung also facing new pressure from the Lenovo owned, Motorola, who not only have the Razr 40 Ultra a serious contender to the Z Flip 5, but they are also pushing further into the premium smartphone market and will have watches and tablets to take right up to Samsung.
Their smartphone products which are cheaper than Samsungs are now being ranged alongside Samsung smartphones, at carriers such as Telstra and Optus as well as mainstream retailers such as JB Hi Fi where new instore merchandising and isle ends are set to appear in August.
Samsung’s global market share, fell from 31% in 2013 to 21% in 2022.
Operating profit in the smartphone segment halved from 25 trillion won in 2013 to 11.67 trillion won in 2022.
Samsung’s profits used to rest on two pillars: semiconductors and smartphones.
If the highly cyclical semiconductor business was sluggish, the smartphone division in the past made up for it and often delivered steady growth.
All that is now disappearing with brands such as Lenovo and Motorola taking over from the struggling Oppo in Australia to pressure the South Korean Company who spent $79M on advertising in 2022 in Australia, Apple is also holding onto share with declines one third of Samsung declines.
In the past displays and appliances also contributed to overall revenues however the TV market has declined in Australia, with market leader Samsung rolling out major discounts in an effort to shift stock in Australia this year.
Retailers are looking for improved average selling prices to make for falling sales and heavy discounting by brands is not helping.
Globally profitability began declining in the 2010s under intense competition from Chinese manufacturers in displays, appliances, and TVs.
China later began catching up in smartphones too, eventually whittling Samsung’s profit model down to one main pillar, semiconductors.
Now, the worst chip slump in 14 years has hit the company head-on, leaving a deep hole in earnings for other segments to fill claims Nikki Asia.
The semiconductor business posted an operating loss of 4.36 trillion won last quarter. The smartphone business logged a profit of about 3 trillion won, while displays brought in 840 billion won in profit, and the home appliance and TV business 740 billion won.
As the replacement cycle in smartphones has lengthened, many consumers want premium devices that they feel satisfied using for several hours a day, Roh told reporters, predicting that foldables will become mainstream within the next few years.