 |
| Employees of Samsung Electronics check the products near an advertisement of Samsung Electronics' Galaxy S6 smartphone at a Samsung Electronics shop in Seoul, Tuesday. / Yonhap |
By Kim Yoo-chul
Samsung Electronics said Tuesday that it expects to report 6.9 trillion won in operating profit in the second quarter, down 4 percent from a year earlier.
Its sales also dropped 8.4 percent year-on-year to 48 trillion won.
Quarter-on-quarter, sales rose 1.87 percent, operating profit also jumped 15.38 percent.
In its quarterly earnings guidance, Samsung didn't open up divisional performance.
Its results fell short of market expectations. The market consensus for the operating profit was 7.1 trillion won and 52 trillion won for sales.
Analysts said weaker-than-expected sales of its premium smartphones hit the bottom line, while robust chip business helped prevent its overall profits from falling further.
Analysts expressed concerns over the drop in sales.
"The figures are not good. In particular, the fall in sales reflects the failure to sell more of its key products," said Lee Ka-keun, an analyst at KB Securities.
Lee said demand for the Galaxy S6 series remained weak against the company's earlier projections.
"Samsung shipped its smartphones below its internal expectation and that is also blamed as the reason to drag down profit in the company's component businesses," Lee said.
Weak demand for home appliances such as TVs in Europe and key emerging markets also weakened its overall results.
Samsung increased the shipments of the S6 models. However, that led to more inventory.
"The smatphone market wasn't that strong. Cheap Chinese phones increased their share and Samsung was passive to launch cash-burning promotional campaigns," said an official at Samsung.
Strong memory chip business
Samsung expects a mild recovery in the second half thanks to bullish semiconductor business.
"Samsung's semiconductor division is expected to surpass the 3 trillion won mark in operating profit during the latest quarter. This is really huge and the second half will also be good," said another Samsung official.
Samsung, the global leader in memory chips, is positioned well to benefit the most as the new order prevailed in the industry with three rational players, including SK hynix and Micron Technology of the United States.
"Set-making businesses such as mobile phones, appliances and televisions have to face fiercer competition to win more shares, meaning it's tough to achieve a higher profit margin. But for Samsung, the semiconductor business is a different story as Samsung is a dominant supplier and that guaranteed sustainable growth and sustainable profit," the Samsung official stressed.
Samsung won Apple back as one of its customers. It will sell DRAM, NAND and mobile APs to the iPhone designer and it also gets more orders from Qualcomm, Nvidia and Sony to manufacture customized chips on a contractual basis.
"Logic-chip making business will earn more profit. In DRAM and NAND chips, its efforts to migrate thinner technology will pave the way for the firm to generate more, helping the corporation boost its overall profit in the latter half," said the official.
The company also said its home appliance business division plans to sell more TVs and home gadgets in its key target markets such as Europe and China by focusing on the business-to-business (B2B) segment.
![[ANALYSIS] China's ban on Micron tests Washington-Seoul alliance](https://img.koreatimes.co.kr/upload/thumbnailV2/1785a57b07ae45a7b7db49fdf4acd720.jpg/dims/resize/178/optimize)
![[INTERVIEW] Long-awaited extension of Korean Pavilion at Venice Biennale to be pushed forward](https://img.koreatimes.co.kr/upload/thumbnailV2/d8d5090875824ce08a90bb2c5a8f8c05.jpg/dims/resize/178/optimize)
