Samsung Electronics warned investors it was going to make a lot less money this quarter, and sure enough, the company just reported first-quarter earnings that show profits slid 60 percent compared to last year, from 15.64 trillion won (roughly $13.4 billion) to just 6.2 trillion won (about $5.3 billion).
But unlike Google earlier today, the company’s not blaming its expensive phones for anything whatsoever — Samsung says the Galaxy S10 lineup actually sold well, with the company shipping 78 million phones overall (as well as 5 million tablets) in the quarter, and that any weakness in phones can be explained by its low and mid-range models cannibalizing sales for last year’s Galaxy models. (A big part of Samsung’s new phone strategy is bringing hot features to its mid-range phones, like the new A-series.)
Samsung’s expecting to ship slightly more phones next quarter, too.
Instead, the stated reasons for the decline are primarily the same as last quarter: falling demand for memory chips, which is Samsung’s true bread and butter, as well as decreased demand for displays. The company says things should improve in the second half of the year, with more demand for flash memory in servers, as well as smartphones with 256GB of storage and up, and the company says it’s actually shipping more processors and modems even as demand for its image sensors are slowing — that last one due to “weak smartphone seasonality.”
Samsung didn’t initially mention its beleaguered Galaxy Fold foldable smartphone on the earnings call, but did answer one question about the phone by saying the company would announce an updated launch schedule “within the next few weeks.” It’s possible that date will be in the second half of the year, depending on how you interpret this passage in its press release (bolding ours):
For the second half, despite intensified market competition, Samsung expects smartphone sales to increase led by new models in all segments from the Galaxy A series to the Galaxy Note amid strong seasonality. In the premium segment, the Company will strengthen its leadership through the new Galaxy Note as well as its innovative products such as 5G and foldable smartphones.
More generally, the company predicts that increased demand for flexible screens may help its display business due to some unspecified “new smartphone launches,” but also that demand for flexible displays may be “soft” for now. The company’s display business is banking on other, non-flexible smartphone screens to help the division “rebound.”
Here’s the company’s slidedeck if you’d like to peruse its earnings further.
By Sean Hollister