Samsung is making less money from phones, but chip sales are up

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Samsung Electronics announced a fourth quarter earnings decline on Thursday, its first holiday season drop in three years.

The earnings report wasn’t as gloomy as the past few quarters have been: Samsung made an operating profit of 5.29 trillion won ($4.87 billion) on 52.73 trillion won ($48.6 billion) in revenue. Nearly $5 billion in profits is still a big number, but it’s down from last years 8.31 trillion won in operating profit. Revenue was down from 59.28 trillion won.

Samsung’s struggles in its cash-cow handset division (IT & mobile communications) are well documented: It’s getting beat by Apple on high-end handsets (even in South Korea) and its margins are getting pressured on the low-end from companies such as Xiaomi and Lenovo. In this past quarter, Samsung reorganized much of its mobile executive ranks, firing several VP-level employees, including head of mobile marketing D.J. Lee, while keeping mobile unit head J.K. Shin in charge. Profit from Samsung’s handset division dropped to 1.96 trillion won from 5.47 trillion won in the year-ago period.

Some are wondering whether Apple may have sold more total handsets than Samsung in the most recent quarter. Samsung says its high-end products, specifically the Galaxy Note 4, are seeing “increased sales.”

Photo by Kif Leswing/Gigaom One bright spot in the Samsung Electronics earnings report was for its semiconductor division, which posted a profit of 2.7 trillion won ($2.4 billion). Samsung makes processors as well as memory chips.

Samsung attributed its semiconductor division performance to increased demand for DRAM. But part of it could also be due to Samsung winning contracts for semiconductor fabrication for future Apple iPhones, or it could be because Samsung will likely be using its chips in its own phones instead of ones made by Qualcomm, as has been seemingly confirmed by Qualcomm itself. Samsung also plans to spend more money to boost its chip output, the company said in a statement.

Samsung has already made several major shifts in its handset and overall strategy that haven’t completely shown up in this most recent earnings report.

It has consolidated many of its mid-range devices into a new A Series sporting Samsung’s new aluminum construction, and it appears to be going forward with unique curved displays like those found on the Galaxy Note Edge in future devices. Samsung is also a major player in virtual reality, having released the Gear VR headset in the past few months. It released a phone running its own Tizen operating system, which will start showing up in TVs and other connected durable goods made by Samsung’s consumer-electronics division. In the next year, those decisions will start to have a bigger impact on Samsung’s bottom line.

 

 

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jjj

That claim about Korea is unfounded. You claim that apple beat Samsung in high end in Korea but that research doesn’t provide details about high end , just total number of devices and there Samsung has the lead. It’s also just one month, not even a quarter so the claim is forced.
Then Xiaomi still doesn’t make low end device and Lenovo doesn’t really have very good prices or solid growth so it’s a poor example.
This reminds me that a few h ago i was amused by Samsung’s pricing in an online store in a developing market, their A5 was more that the S5 or LG G3. If anyone is harming Samsung’s sales, it’s Samsung itself in their desperation to keep margins up. They are willing giving up share for margins.

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