Samsung’s financial report for the quarter ending June 2020 – 23% year-on-year growth in operating profit
Based on the latest report of Canalys Institute, Huawei has become the number one brand in the world of smartphones in the quarter ending June this year and LG In the list of top 10 manufacturers, it has taken the ninth place. This is the first time in the last 9 years that a company other than Samsung and Apple dominate the smartphone market. leans According to the published report, despite giving the first rank to Huawei, has managed to bring 54.2 million smartphones to the market in this period of time, leaving a good performance overall. In fact, despite the spread of the Corona epidemic, which has led to the closure of stores and production stagnation globally, in the period from April to June 2020, Samsung has been able to overcome the impact of the epidemic through the expanded global supply chain, the strengthening of online sales channels and the optimization of prices. Reduce your business.
In Samsung’s report, details related to the financial results of the company’s various departments are presented, which we will have a brief look at below:
Information technology and mobile communication (IM)
In the second quarter of this year, Samsung’s total revenue in the mobile information and communication technology business was 20.75 trillion won (about 17.3 billion dollars) and its operating profit was 1.95 trillion won (about 1.63 billion dollars). which was predicted in the last season has had a downward trend. Of course, despite the weak smartphone sales, Samsung has managed to achieve an acceptable profit in this sector by reducing marketing costs and other optimizations, which shows a 25% growth compared to the second quarter of 2019.
The closure of stores in regions such as North America and Europe to prevent the spread of Corona has caused the overall market demand to decrease in the second quarter of 2020 compared to the first quarter of this year, and as a result, the supply of smartphones and the resulting income also face a decline. However, cost management, including cutting marketing costs and offering special offline offers, has helped Samsung largely maintain its profits.
Company managers expect that in the upcoming quarter, the sale of smartphones will increase compared to the second quarter. With the introduction of new flagship models such as the new Galaxy Note series, the Galaxy Note 20, and a new foldable phone (probably named Galaxy Z Fold 2 5G) at the Galaxy Unpacked event (which will be held online this year due to the spread of Corona) in August 5th will be fulfilled.
Samsung’s mobile communications business seeks to improve the production and sales of mass market products and mid-range models in addition to introducing advanced smartphones. According to analysts’ predictions, with the gradual revival of the smartphone market, it seems that in the second half of this year, we will witness the intensification of competition between companies and the increase in demand for this category of products.
According to the report, Samsung’s investments in the network business, both in the domestic market and outside of Korea, have been delayed due to the global spread of COVID-19. However, despite some doubts about the 5G service and the timing of the operators’ investment, the Korean giant has stated that it will continue to “seek new opportunities to expand [its] business”.
In the second quarter of this year in the semiconductor business, the Korean company managed to achieve a revenue of 18.23 trillion won and an operating profit of 5.43 trillion won. In fact, about two-thirds of Samsung’s operating profit in the last quarter was the result of this division’s performance. According to the report, revenue from the memory business has increased due to strong demand from data centers and personal computers. However, the low demand for mobile memory has caused NAND memory to experience little growth compared to the overall market.
Of course Corona epidemic has not harmed Samsung because they work Distance, video conferencing and online training have caused the demand for memory for use in data centers and cloud applications to remain strong. In the meantime, System LSI’s income has fallen, but the Foundry Business division has managed to register a quarterly and six-month record in income. It is worth mentioning that the Korean company has put the mass production of 5 nm products in this sector along with the development of 4 nm process technology.
Samsung announced in this report that it plans to expand sales of key products such as high-resolution image sensors and 5G chips. Also, company managers expect that with the release of new game consoles and smartphones, the demand for graphics memory and mobile memory will increase.
Income and operating profit of the display panel business in the period of April to June 2020 were announced as 6.72 and 0.3 trillion won, respectively. According to Samsung’s report, the segment’s revenue increased compared to the previous quarter, thanks to a one-time payment for the segment despite weak demand for display panels. According to smartphone activists, this one-time and sudden income apparently refers to an amount that Apple has paid Samsung in order to compensate for the loss caused by the decrease in iPhone panel orders (compared to the expected amount), and Bloomberg has estimated this amount at about 1.1 trillion won (about $924 million).
The spread of COVID-19 has had a negative impact on the sale of smartphones and caused the display of these products to experience low sales. On the other hand, the increase in remote work has led to the growth of sales of screens and large monitors and the reduction of Samsung’s operating loss in this sector.
Samsung, while taking into account the risks and uncertainties caused by the continuation of the Corona epidemic, expects the demand for mobile screens (especially in simple and mid-range models) to increase in the second half of this year, as major customers The company is looking to introduce new products to the market. Also, this company is not only looking to expand its presence in areas such as bendable phone screens and other IT devices, but according to the plan, it will accelerate the production of QD (abbreviated quantum-dot) displays, which will increase the sale of large panels.
Consumer Electronics (CE)
In the past quarter, Samsung’s revenue in this sector, including digital home appliances and visual display businesses, reached 10.17 trillion won, of which 0.73 trillion won was operating profit. Increasing sales of household appliances such as air conditioners, Grande AI washing machines and dryers, and advanced TVs including OLED models, along with effective marketing strategies, can be considered as one of the reasons for the profitability of this sector. Despite this, the conditions of the global car market caused HARMAN, as one of Samsung’s subsidiaries, to report operating losses.
The Korean company announced that to increase profitability in this sector, it will seek to sell advanced devices including QLED TVs and Bespoke series home appliances, as well as increase the marketing effectiveness of its products. He also predicted that the improvement of the outlook of the automobile industry and more sales of audio devices will increase HARMAN’s revenue and profit.
According to this report, the company’s capital expenditures in the second quarter of this year totaled 9.8 trillion Korean won, of which 8.6 trillion won was spent on semiconductors and another 0.8 trillion won was spent on display panels. Samsung announced total capital expenditures in the first half of 2020 at 17.1 trillion won, of which 14.7 and 1.6 trillion won were spent on semiconductors and displays, respectively.
Samsung Electronics Company is expected to gradually face more demand for mobile phones and consumer electronic devices in the second half of 2020. Although the market risk, caused by the global pandemic and the increasing presence of strong competitors, will still remain, the Korean industrial giant is trying to reliably respond to this demand through flexible supply chain management (SCM).