INSUBCONTINENT EXCLUSIVE:
Samsung has put outearnings guidance for its Q2which indicate quarterly growth at its slowest for more than a year — as a lack of new
ideas to sell high end smartphones drags on the company bottom line.
The electronics maker is reporting estimated profit of 14.8 trillion
Koreanwon (USD$13.2BN) on revenue of 58 trillionKorean won (USD$51.9BN) for the quarter.
Samsung expectation just misses an average estimate
of 14.9 trillion won from 18 analysts polled by Thomson Reuters, and shares in the company are down just over 2 per cent on the earnings
guidance news.
The Q2 forecast compares to profit of15.64 trillion Korean Won (USD$14BN) on revenue of 60.56 trillion Korean Won
(USD$54.2BN) for its Q1— when Samsung reported a record operating profit off the back of growth in its semiconductor business plus the
early global launch of its flagship Galaxy S9 smartphone.
Despite that Q1 high, it had prepared investors for a Q2 slowdown — warning in
Aprilof challenging conditions ahead, citing weakness in the display panel segment and a decline in profitability on the mobile side, amid
rising competition in the high-end smartphone segment.
At the same time, the global smartphone market is shrinking — even in China, the
erstwhile growth engine for smartphones after Western markets saturated
So Samsung smartphone business is facing a dual squeeze from shrinking sales opportunities and rising competition from the likes of China
Huawei and Xiaomi — two rival Android device makers that have been carving out additional marketshare.
Meanwhile, Samsung main rival for
high end smartphone profits, Apple, beat analyst estimates of iPhones shipments in its Q2 in May, despite an earlier miss in the holiday
quarter — showing the staying power of its high end smartphone brand and a positive, if slow burn, response to how it iterating its mobile
business, with the iPhone X.
Returning to Samsung, the positive story for the company — continued record growth for its chip business—
is still not filling the smartphone-shaped profit hole in its books, even asrestarting momentum in the smartphone segment is looking
increasingly tough in a very tough market.
The Galaxy S9 is a solid smartphone but serving up more of the same equals diminishing returns in
the fiercely competitive Android space.And investors look circumspect, with shares in Samsung down around 12% this year.
One wild card on
the device innovation front: Samsung has been teasing its RD work to build a foldable smartphone for multiple years
Ahead of Apple iPhone X flagship launch last year Samsung suggested it was targeting 2018 to finally release a product.
However this is also
a risky strategy given the obvious manufacturing challenges, and — beyond that — question marks over whether a foldable smartphone is
really the type of mainstream innovation that could fire up major momentum among high end handset buyers or be viewed as a niche gimmick.
