Samsung, LG hit by sluggish smartphone business

By Jun Ji-hye

Samsung Electronics and LG Electronics have been grappling with sluggish smartphone sales, while their booming semiconductors, home appliance and other businesses are making up for the shortfalls.

Analysts attributed the slowdown to stagnation in the premium smartphone market as well as the threat from low-priced Chinese competitors.

Samsung Electronics' third-quarter earnings guidance report released Friday showed that the firm recorded an operating profit of 17.5 trillion won ($15.47 billion), a 20.4 percent increase, on the back of solid sales of DRAM chips.

But the tech giant was presumed to have had unsatisfactory results in its smartphone segment despite the release of the Galaxy Note 9.

The company did not disclose detailed figures for each business unit. Local brokerage firms estimated Samsung's operating profit in its IT and mobile communications (IM) unit at about 2.2 trillion won, down more than 1 trillion won from a year ago when the firm posted 3.29 trillion won.

The estimate was down 500 billion won compared to the previous quarter when the firm did not release any new smartphones.

The company was already posting weaker-than-expected sales of its Galaxy S9 smartphones in the second quarter. It has been generally assessed that the Galaxy S9 series, unveiled at Barcelona in February, failed to offer any significant improvements over its predecessors, resulting in a failure to attract more customers despite higher marketing costs.

The company expected the Galaxy Note 9, unveiled in New York in August, to make up for the poor performance of the Galaxy S9, but this has not happened.

LG Electronics faces a similar situation. According to its third-quarter earnings guidance report, also announced Friday, overall operating profit was 745.5 billion won, up 44.4 percent from a year ago, thanks to strong sales of its home appliances.

The firm's mobile communications (MC) division, which has been losing money for 13 straight quarters as of the second quarter, is expected to continue to run a deficit. Brokerages estimate the third-quarter operating loss will be about 160 billion won.

Analysts expect sluggish smartphone sales to continue into the fourth quarter.

“Difficult competition is expected in the fourth quarter due to Apple's new smartphone as well as attacks from newcomers such as Huawei,” said Park Won-jae, an analyst at Mirae Asset Daewoo.

But he noted that smartphones for fifth-generation (5G) networks and foldable phones could become growth engines.

“Companies can expect improved performances next year when foldable phones are expected to be released and when there will be demand for 5G smartphones,” he said.

LG unveiled its newest premium smartphone featuring five cameras, Thursday, seeking a turnaround in its mobile unit.

The company said the LG V40 ThinQ, the latest model in its acclaimed V series, was an uncompromising multimedia powerhouse designed for today's generation of storytellers who prefer to communicate with visuals and videos, especially on social media.