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.

Comments closed
    • ronch
    • 1 year ago

    Between the S9 and iPhone X, which would you choose and why?

    Anyway, I just got an S9+. Pretty solid phone.

    • Jigar
    • 1 year ago

    52 Billion dollar revenue is soft ?

      • GrimDanfango
      • 1 year ago

      Capitalism! It doesn’t matter how big you get, if you aren’t multiplying exponentially like a planet-consuming cancer, you’re failing!

      Thankfully, so far, all companies that have existed have failed. I dread the day that one succeeds.

    • albundy
    • 1 year ago

    what flagship? it removed all great features. its been the same boring meh phone as all the other cheapo’s out there since the S6 line. its all cookie cutter boredem. it literally offered nothing better for me for the past 4 generations.

    • Chrispy_
    • 1 year ago

    Android flagships are now totally unnecessary:

    In the past, the flagships offered a performance and quality advantage if you could afford it.

    These days the experience bottleneck is in the apps and mobile networks. Even a $250 phone is fast, alloy-bodied, IP67-certified, has a great screen, a great camera and works as well as a flagship is the vast majority of use cases.

    There are some supernerds who will disagree with me but I speak for the user-base of staff I provide company phones for. Normal people who just want a social media cameraphone with email and internet. They don’t care about how to unlock a bootloader and flash a different ROM, they just want the apps to work quickly and smoothly when they press the icon.

    • not@home
    • 1 year ago

    Dear Samsung,
    If you want me to buy your phones: stop giving the screen stupid rounded edges that could break and are right where I grip the phone, stop making it too thin, give it a huge battery so that it lasts four days on a charge, make it waterproof and drop proof (heck, just go all out and make it bulletproof), make sure it has an SD card slot, a removable battery, hardware buttons for app switching Home and back, and a decent camera.
    Sincerely,
    Phone User

    P.S. Get rid of the skin. Just go stock Android.

      • Chrispy_
      • 1 year ago

      Yes. My Samsung is **** but at least it runs LineageOS.

      It’s now in a case for grip but it’s fragile, overly-reflective, lasts barely more than 24 hours away from the wall socket and too thin to put in any pocket where it might get bent or cracked. Even in the rubber case it could do with being thicker both for ergonomics reasons as well as improved battery reasons.

      We’ve come a long way from the Nokia 3310 in capability, but so many smartphone vendors could still learn a lot from that old legend.

        • DancinJack
        • 1 year ago

        That’s easily the best “feature” of Samsung phones. They have really great 3rd party ROM support precisely because they’re so popular [i<]and[/i<] their software sucks so bad. I had a GS3 that pretty much had a ROM on it from day one.

          • Chrispy_
          • 1 year ago

          Yeah, I learned to AOSP ROM my SII even though it was my first Android phone. Touchwiz is still bad, but back in those days it was a whole ‘nother level of awful.

            • VincentHanna
            • 1 year ago

            I haven’t owned a Samsung since my Galaxy Note 2, because that’s the gen where they introduced hardware fuses to keep you from replacing their firmware.

            • Chrispy_
            • 1 year ago

            Ah, that sucks; You’re in the US or Asia I assume? The EU invalidated Samsung’s wish to use that against a warranty claim.

      • DancinJack
      • 1 year ago

      Gross hardware buttons.

    • Kretschmer
    • 1 year ago

    Android flagship phones used to make sense 5+ years ago, when a flagship offered a huge increase in responsiveness and usability in a sea of junk. Now it is very tough if not possible to tell the difference between today’s flagship and low-mid-range in common tasks, with the flagships differentiated by top-tier cameras and other questionable value propositions. Especially when flagships continue to shed features like removable batteries, SD cards, and 3.5mm jacks.

    It doesn’t help that Samsung goes out of their way to butcher Android with their skinning, rehashed “me too” apps, and resultant delayed updates.

    My Pixel 2 is overpriced for what it offers and I won’t be buying another flagship. Much cheaper phones like the recent Nokias are as good or better (3.5mm jack, removable batteries, etc.) than flagships, and all those compromises for cutting edge style get obscured by the mandatory protective case.

      • DancinJack
      • 1 year ago

      I think you forgot to say “IMO.”

      • Laykun
      • 1 year ago

      Odd, I’ve had two flagships so far and no need for a screen protector and case. I brought my note 5 into the store for a trade up and they said “Oh wow, that’s in good condition”. Maybe if you spend money on a flagship don’t throw it round and take care of it. Yes drops happen and the note 5 took it like a champ, generally it falls on its corner so you get a bit of scuffing on the edges. On a note 8 now and similar experience.

    • wingless
    • 1 year ago

    I wonder if OnePlus is taking some of these sales. I love mine.

    • DreadCthulhu
    • 1 year ago

    Samsung should make a seriously courageous decision, and remove the headphone jack & sdcard slot from their phones. And add a notch too! That will guarantee more sales. 😉 Seriously though, the smartphone market is hitting the same saturated market that the PC market did; older phones are still plenty good enough for what the average person does with them. I am using a 2.5 year old phone that was midrange ($230, Asus Zenfone 2 Laser) when I bought it, and it still does all the stuff I need it to do. Its kind of sad how little the mid-range market has progressed since then. My phone has a 5.5″ 1080p screen, 3GB RAM, 32GB storage, a Snapdragon 615 with 8 A53 cores, and so on. The specs of current phones in that same price range haven’t really improved much; sometimes they will have 4GB of RAM, or 64 GB of storage, and their 8 A53 based SoCs will be clocked a bit higher, but overall no where near the difference between say a 2011 phone and 2013 phone.

    The smartphone market will of course, still have a higher turnover rate than the PC market, due to the fact that smartphones break or get lost/stolen much more often. But unless Android makers can get people to see them as fashion objects, like Apple has managed, the market is likely to stagnate from here on out.

    • strangerguy
    • 1 year ago

    Oh how well that price fixing paid off. Even if China got their way imposing a one time max $8B fine and directed all to Samsung they would still made $5B profit this quarter let alone their previous ones, plus that from Hynix and Micron.

    • Phr3dly
    • 1 year ago

    I’ll be curious to see Apple’s sales. I’m hoping for a slow quarter for them as well, though much of me assumes that it’ll be Yet Another Blowout. The yearly cycle of jacking prices $100 has to end eventually.

    With the end of reasonably priced Nexus devices I finally splurged on a Samsung S8 a while ago. I didn’t pay anywhere near retail, but even at $450 (including a trade-in of an old Motorola) it seemed pricey. Moreso when I dropped it and the screen shattered. I briefly owned an iPhone X, but nothing about it made me think it was worth $1100 for a phone that would either break or be replaced within a couple years.

    I finally settled on a Moto X4 for $250 or so during an Amazon blowout sale. In the last 7 months I’ve never had a reason to regret that purchase. If it breaks, no big deal. I don’t feel compelled to treat it like a work of art nor a faberge egg. Honestly moving from a flagship to a mid-range phone is a big stress reliever.

      • DancinJack
      • 1 year ago

      You’re hoping against hope. Apple sold a ton of phones, as usual.

        • Chrispy_
        • 1 year ago

        Yes. 41 million units.

        But the interesting fact is that Apple only increased sales of phones by 1% despite selling in a much wider market than last year. Per capita, Apple phones are down, significantly.

    • derFunkenstein
    • 1 year ago

    Thrilled to see a big player experience slow or negative growth on flagship phones. Releasing the same thing year after year and charging more and more for the privilege can’t possibly be a valid growth strategy. If only it would happen to more, and then maybe manufacturers would innovate or drop prices in an effort to ship more devices.

      • chuckula
      • 1 year ago

      [quote<]Releasing the same thing year after year and charging more and more for the privilege can't possibly be a valid growth strategy. [/quote<] WE DISAGREE! -- Intel (throw Apple in for good measure too)

        • Phr3dly
        • 1 year ago

        It’s interesting to see the revival of the PC market with Ryzen’s rise. As an former 20-year Intel employee it was easy to see enthusiast interest in processor performance wax and wane with competition. During the many years where there was really only one viable competitor, upgrade cycles slowed and not just because innovation slowed. The tit-for-tat performance increases really drive interest among consumers.

        Perhaps this is part of Samsung’s problem. They have a dominant position in Android handsets, at least in the US. Google’s lost the plot entirely with their lineup, and most of the rest of the flagship market each has a fatal flaw or two.

          • just brew it!
          • 1 year ago

          Is it really due to Ryzen, or is it due to people finally replacing systems with CPUs that are so old that they are not getting patched for Meltdown/Spectre?

            • GrimDanfango
            • 1 year ago

            I think it’s definitely Ryzen… speaking as someone still in the Intel camp. Alas, I made a jump to an overpriced Intel 8-core (5960x) just before the big Ryzen shakeup, and I’m deeply regretting it now that Intel are seemingly responding with much higher-clocked, more affordable consumer 8-cores.

            I never thought the market would get this big an injection of momentum this fast, or I’d definitely have waited longer. If I didn’t have work to do, my 3770k would’ve sufficed for gaming for a few years yet anyway.

            Couldn’t care less about Meltdown/Spectre really.

            • Phr3dly
            • 1 year ago

            Yep. I like to mess around with little coding projects and play with new tools like docker and whatnot but I’m not a gamer and probably no longer even an “enthusiast”. I really only get the itch to build a new computer when I start seeing this kind of competition. I doubt I’m unique.

            In the last year I’ve built up two new systems, one mini-pc with a 7500 and one uATX with an 8700K and a boatload of Optane. Prior to that, it had been probably 7 years since I had the itch to build a new system.

            • strangerguy
            • 1 year ago

            After my 2500K in 2011 I have been upgrading increasingly out of sheer boredom than a real need to.

            And this year so far was a complete snoozefest besides the great SSD prices that appeared at midyear mark: $250 for 2TB, $70 for 480GB.

            • Phr3dly
            • 1 year ago

            My guess is the former. Honestly I don’t see many people caring /that/ much about the speculative execution flaws. They’re devilishly difficult to exploit in real life, and can be made more challenging with OS patches. And the up-swing in interest started occurring before news on those flaws broke.

            Everytime for the last many years that AMD released a new uarch you’d start to see a groundswell of interest, and then the balloon would pop when it turned out to not be competitive. This time it actually /is/ very competitive and the last 18 months or so have seen more activity in this space than I can remember in a long time.

            • derFunkenstein
            • 1 year ago

            I don’t think people outside of tech circles are even aware of Spectre and Meltdown.

            • just brew it!
            • 1 year ago

            Corporate desktops are a huge chunk of the market for desktop PCs.

            • derFunkenstein
            • 1 year ago

            I guess that’s true but they tend to get upgraded on regular cycles. It’s the rest of the market that’s less predictable and (from what I can tell) should be driving growth and dips.

            Maybe it’s just that everybody’s Sandy Bridge system is finally dying after 7 years of solid use, and instead of fixing it they figure they need a new one.

            • blastdoor
            • 1 year ago

            I agree, but I also don’t think they are aware of Ryzen.

            But I might be able to imagine that people notice when the number of cores goes up from 4 to 6/8. And they might notice when prices drop. People don’t need to know that Ryzen was the cause of those things in order to be affected by Ryzen.

            edit — I wonder how many people think that Intel has a new advanced micro device that they call Ryzen and it packs 8 pentiums into one CPU….

          • Ushio01
          • 1 year ago

          Seriously? Ryzen and all desktop sales are negligible it’s notebook sales which Intel owns and server sales.

      • maxxcool
      • 1 year ago

      You should tell apple that .. except they still are sitting on 285 BILLION in actual cash..

        • blastdoor
        • 1 year ago

        Apple’s new business model: share buybacks.

          • uni-mitation
          • 1 year ago

          1- That’s a losing business model in my opinion. Sitting on piles of cash and not putting that capital to work in future R&D will end up leaving them wide open once the new disruptive player comes on the scene just like Blackberry.

          2- Buying back shares at a time when it could be argued that the whole equity market is overvalued, and there is cheap money all around (thank the FED)is a bad idea. Capitalism works when all that excess capital is put to work for new investments that end up creating competition, and increasing the standard of living. What we have is akin to Apple putting their bundle of money under the mattress for no good reason.

          My two cents.

          uni-mitation

            • blastdoor
            • 1 year ago

            I agree in principle, but in practice I think it’s pretty hard to figure out how to [b<]productively[/b<] invest over $200 billion in R&D or capital expenditures (it would not be hard to figure out how to [b<]un[/b<]productively invest it, of course). One way to burn through a lot of money would be to build their own fabs, but I think it's pretty hard to argue that would make good business sense. Building a new global car company from scratch could involve some big expenditures, but also a lot of risk. I actually think the best thing to do with the money is to buy back stock and then distribute it to employees as part of an employee stock ownership plan (ESOP), with restrictions that if you leave the company you have to sell. The most valuable assets Apple has long term are its culture and its people. The more Apple can attract and retain the best talent, the better off they will be.

    • chuckula
    • 1 year ago

    If this had been Intel we all could have gloated about how the PC is dying.

    But can this mean that the smartphone is dying!?!?!!?

      • blastdoor
      • 1 year ago

      Samsung makes up a much smaller share of the smartphone market than Intel does of the PC market, so Samsung is not as good of a barometer of the overall smartphone market as Intel is of the overall PC market.

      Of course, with AMD on the ryze, perhaps Intel will become less of a barometer for the whole PC market. So your argument has that going for it, which is nice.

      • just brew it!
      • 1 year ago

      I think it means people have gotten tired of shelling out hundreds of $ every couple of years for what are generally small incremental product improvements.

        • GrimDanfango
        • 1 year ago

        I wonder how many people have mobile storefront fatigue. I barely ever even load it up any more… any time I do, it’s like wading through a stinking bog. When I had my iPhone it wasn’t much better over there either.
        If people can’t be arsed dredging through a million different money-extraction-packages to find a couple of apps of actual use/entertainment value, there’s not much point having ever-increasing hardware capabilities to run them on.

        Especially when it comes to mobile gaming, I really feel like mobile developers have irreparably poisoned their own well at this point. They could have had the largest gaming device install-base ever known, and made the greatest mobile gaming platform ever… instead they went the slash-and-burn approach.
        Might as well just get a basic phone and a glorious Nintendo Switch at this point 😛

      • gmskking
      • 1 year ago

      I wish smartphones would die.

        • GrimDanfango
        • 1 year ago

        Be careful what you wish for… that would likely just mean something even more invasive came along to replace them 😛

          • just brew it!
          • 1 year ago

          “We’re sorry, security updates are no longer available for your model N2 neural implant. To minimize the risk of your brain becoming infected with harmful malware, please schedule surgery for an upgrade to the N3, N3s, or N3+ model at your earliest convenience.”

    • blastdoor
    • 1 year ago

    No doubt about it, that’s a big company.

    It’s actually a little surprising that they aren’t a bigger player in CPUs. Maybe they should take a stab at the ARM server business.

      • chuckula
      • 1 year ago

      Yes, the ARM server business has truly been a cash cow that has been the core business of such companies as:

      1. AMD (Remember that K12 thing that Lisa knifed in a dark alley as soon as it turned out Epyc was good enough to deliver some type of profit?)

      2. Apple… because it’s Apple.

      3. Qualcomm: Who the hell needs modems or smartphone SoCs when there’s ARM server parts? AMIRITE?

      4. Cavium: Good enough to get us bought out by Marvell who is best known for hard drive controllers and Ethernet chips.

        • blastdoor
        • 1 year ago

        It’s the total absence of any credible player in this market that makes it potentially appealing for Samsung. AMD didn’t have the funds to pursue ARM and Zen at the same time; Apple won’t share anything they do with anyone else; Qualcomm views CPUs as a loss leader for its patent licensing business; and the various little guys were just too little to make it.

        Samsung has the money and the fabs to possibly make it work. The only small thing holding them back is that they suck at software and seem to be pretty closely connected to Korean organized crime groups (or perhaps simply [b<]is[/b<] Korean organized crime). But otherwise , it's perfect!

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