Samsung’s mobile business booked solid gains in profitability in the first quarter of the year as sales of premium 5G models ramped up, but it forecast demand to drop sharply in most regions due to an economic downturn caused by Covid-19 (coronavirus).
While revenue for its IT and Mobile Communications division fell 4 per cent year-on-year to KRW26 trillion ($21.19 billion), with sales weakening towards the end of the first quarter, operating profit rose 16.7 per cent to KRW2.65 trillion. The company credited the gain to an improved product mix stemming from premium 5G models accounting for a larger portion of sales and lower marketing expenses.
The ASP of flagship models increased compared with a year earlier on the back of a higher-than-expected share of Galaxy S20 Ultra sales as well as solid sales of the Galaxy Z Flip, it said.
Smartphone shipments declined sequentially to 64 million units.
Looking ahead to the second quarter, the company expects shipments and blended ASP to decline and its overall business performance to weaken as the market shrinks and the effects of store closures continue to have direct impacts.
In an earnings call, Lee Jong-Min, VP of the Mobile Communications Business, said in the midst of uncertainty competition is expected to intensify in the second half as companies try to recover from a weak first half.
He said it will widen its product range and increase competitiveness in each price tier by introducing mass market 5G models.
Earnings for its networks business improved quarter-on-quarter as a result of increased demand for 5G gear in South Korea and other markets.
Lee said Korean operators continue to expand their 5G rollouts nationwide and in other market operators have started to scale up deployments, but acknowledged that with the pandemic at different stages in every country, it’s difficult to predict and warned 5G network investments may face delays, which would impact its business.
Group performance
On a group level, net profit fell 4.3 per cent year-on-year to KRW4.89 trillion, while total revenue increased 5.6 per cent to KRW55.33 trillion due to strong demand for memory chips in servers and PCs.
Its semiconductor business posted 22 per cent growth in revenue to KRW17.6. trillion.
Looking ahead, the company expects its memory business to remain solid in Q2, but overall earnings are likely to decline from the previous quarter because the outbreak will significantly impact demand for several core products.
It said it wouldn’t provide an annual guidance.
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