Samsung’s mobile division recorded lower profit and revenue in Q4 2020, due to sluggish demand in the wake of widening Covid-19 (coronavirus) restrictions, but the vendor predicted gradual recovery starting in the current quarter driven by new launches and rising ASPs.
Operating profit for its IT and Mobile Communications Division dipped 4 per cent year-on-year to KRW2.4 trillion ($2.1 billion) and consolidated revenue fell 10.5 per cent to KRW22.3 trillion.
On an earnings call, Mobile Communications Business VP Kim Sung-Koo said the profit decline was due to weaker sales, higher marketing spending and intensified competition, but noted its network business improved on the back of continued 5G expansion in South Korea and a pickup in global 4G and 5G rollouts.
Analysts said its latest smartphone flagship, the Galaxy S21 [1], faces intense competition: major rival Apple reported a 17 per cent increase [2] in mobile revenue in the three months to 26 December.
IDC research manager Kiranjeet Kaur told Bloomberg there “is only so much” market share Samsung could take from a smartphone market featuring “a lot of good devices”.
Improved outlook
Despite forecasting declining global demand for smartphones and tablets in the current quarter, Kim said Samsung expects mobile revenue and profit to rise as its Galaxy S21 drives sales and higher ASPs, and it launches more mass-market models.
For the full year, the company predicted demand will recover to pre-Covid-19 levels, with a gradual economic recovery and full-fledged expansion of the 5G market.
Kim said one of its focuses when developing the Galaxy S21 series was to improve the cost structure by optimising product specifications and using standardised components. It expects higher volumes to be driven by a lower price point, in turn delivering economies of scale.
“We also expect the higher-priced models in the series to account for a larger share of overall volumes, giving us solid profitability.”
He noted many 5G projects delayed due to the pandemic are being restarted, with spectrum auctions scheduled in many countries. Samsung is conducting 5G trials with operators globally, and exploring opportunities in Latin America and Europe.
Group
Net profit rose 23.3 per cent to KRW6.45 trillion and revenue 2.8 per cent to KRW61.55 trillion, driven by its memory chips and display businesses.
The company forecast weaker profitability in the current period, as currency exchange and costs impact the memory unit, offsetting strong demand from mobile products and data centres.
A company representative noted an important variable going forward is concerns about shortages of other components, “so we’re carefully watching how that plays out”.
[1] https://www.mobileworldlive.com/featured-content/home-banner/samsung-zooms-in-on-camera-usps-in-latest-flagship
[2] https://www.mobileworldlive.com/featured-content/home-banner/apple-cashes-in-on-5g-iphone-with-record-profit
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