Samsung posts a soft second quarter on weak flagship phone sales

It's quarterly financial reporting season, and Samsung Electronics recently posted its second-quarter results. The company raked in $52.1 billion in revenue (58.48 trillion South Korean won) at today's exchange rates, and it made $13.3 billion in operating profit on that haul (14.87 trillion KRW). Revenue was down 4% year-on-year, while operating profit rose 6% year-on-year. Samsung said the drop in revenue was thanks to "softer sales of smartphones and display panels," while demand for its memory products helped soften the blow to its operating profits.

As one of the world's largest (if not the world's largest) semiconductor and electronics manufacturing firms, Samsung has lots of irons in the fire. Although it doesn't break out divisional revenues in fine detail, the company said its semiconductor business unit, responsible for DRAM and NAND flash, enjoyed strong results thanks to demand for its DRAM in data-center applications and NAND for high-capacity solid-state storage, even as prices for flash memory devices have begun to fall. The company said it insulated itself against market trends with value-added products like 64-GB-and-higher-density server DIMMs and 128-GB-and-higher-density mobile flash storage devices.

Samsung's display business continues to suffer from weak demand for the company's flexible OLED screens, perhaps in part because of the aforementioned soft demand for its own Galaxy S9 smartphones. The display business also suffered from falling shipments and prices for its LCD panels.

The IT and mobile communications business, the division the Galaxy S9 calls home, reported declines in year-on-year and quarter-on-quarter earnings. Samsung is frank in calling sales of its flagship smartphones "slow," and the fact that sequential revenues are in decline suggests sales of the new flagship are not picking up. The company's network infrastructure division turned in "solid growth," however, thanks to purchases of LTE network hardware by "key global customers."

In other segments of Samsung's business, the World Cup apparently helped strengthen demand for Samsung's premium QLED TVs, leading to higher profits from its consumer electronics division. Samsung's digital appliances unit apparently isn't benefiting from record temperatures across the globe, as it described demand for its air-conditioning products as "weak."

In the second half of 2018, Samsung expects demand to grow for its flexible OLED panels and continued strong demand for its memory products. The company says it will "proactively address demand" for dense server DIMMs and high-bandwidth memory. That latter point especially suggests some interesting products in the pipe from graphics-card or AI accelerator makers. Samsung doesn't expect the winds to improve for its Galaxy S9 in the latter half of the year, but it will try to shore up demand for its mobile products by pulling forward the launch of its next Galaxy Note handset and introducing a broader range of entry-level and midrange handsets.

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