Samsung breaks quarterly profit records yet again, mostly thanks to chips and high-end phones
It’s no big secret that Samsung had a great year following 2016’s Note 7 debacle, turning into gold everything the chaebol touched, from memory chipsets to mobile processors, OLED panels and, of course, own-brand high-end smartphones.
2018 predictably started on a similarly high note for the world’s largest smartphone vendor, number one TV manufacturer and top chipmaker, although Samsung’s new record-setting quarterly profits could have been even higher.
Ironically, the blame lies with Apple, as Samsung’s still-impressive Display Panel business suffered due to “slow demand for flexible” OLED screens between January and March. That’s the type of display used on the iPhone X, which made Samsung a great deal of money during Q4 2017 before its mainstream popularity fell off a cliff.
Looking ahead, OLED cost reductions (no, not those kinds of reductions) and improved production efficiency will need to secure second quarter profitability, while demand for flexible panels should rebound in the year’s second half, probably as Apple prepares to ramp up next-gen iPhone manufacturing.
As far as Samsung’s always successful mobile division goes, we won’t act surprised to hear the early Galaxy S9/S9+ release and “solid” GS8 sales yielded a big Q1 2018 profit. We’re talking no less than KRW 3.77 trillion (around $3.5 billion) in divisional gains, up from KRW 2.07 and 2.42 trillion during Q1 and Q4 2017 respectively.
But the company’s smartphone earnings are expected to decline over the next quarter, as sales of “flagship models” will likely “slow down”, while marketing expenses will increase in order to try to “address the situation.”
It certainly feels a little early for the GS9 duo to lose traction, although Samsung insists the phones themselves are not the problem, but rather “rising competition in the high-end segment.”
Meanwhile, the latest quarter’s big bucks actually came from semiconductors, which generated three times as much operating profit as the mobile business on slightly lower sales. That’s right, Samsung’s chips posted a mind-blowing first-quarter gain of KRW 11.55 trillion ($10.7 billion) on just KRW 20.78 trillion ($19.3 billion) in revenue.
All in all, Samsung made an all-time high KRW 15.64 trillion ($14.5 billion) operating profit, despite reporting consolidated revenues of KRW 60.56 trillion ($56.2 billion), down from KRW 65.89 trillion in Q4 2017. Talk about a well-oiled money-making machine.