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Samsung sees drop in revenue, smartphone shipments

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 27 Jul 2023
Samsung posted KRW 60.01 trillion ($47 billion) in consolidated revenue.
Samsung posted KRW 60.01 trillion ($47 billion) in consolidated revenue.

South Korean electronics giant Samsung has reported a dip in its revenue, amid a decline in smartphone shipments.

Samsung Electronics yesterday announced its financial results for the second quarter ended 30 June.

The company posted KRW 60.01 trillion ($47 billion) in consolidated revenue, a 6% decline from the previous quarter, mainly due to a drop in smartphone shipments, despite the Device Solutions (DS) division’s slight recovery in revenue.

Earlier this year, market analyst firm Gartner predicted worldwide smartphone shipments would decline by 4% in 2023.

According to the firm, smartphone shipments are projected to total 1.23 billion units in 2023, down from 1.28 billion units in 2022.

“Consumers are holding onto their phones longer than expected, from six to nine months, and moving away from fixed to flexible contracts in the absence of meaningful new technology,” says Ranjit Atwal, senior director analyst at Gartner.

“In addition, vendors are passing on inflationary component costs to users, which is dampening demand further. End-user spending on mobile phones is projected to decline by 3.8% in 2023.”

According to Counterpoint Research, Samsung is still the number one smartphone maker, with 22% market share during the first quarter of 2023. It is closely followed by Apple (21%) and Xiaomi (11%.

Samsung’s operating profit rose sequentially to KRW 0.67 trillion ($525 million) as the DS division posted a narrower loss, while Samsung Display Corporation and the Digital Appliances Business saw improved profitability, says the firm.

It says the Memory Business saw results improve from the previous quarter as its focus on high bandwidth memory (HBM) and DDR5 products in anticipation of robust demand for AI applications led to higher-than-guided DRAM shipments.

System semiconductors posted a decline in profit due to lower utilisation rates on weak demand from major applications, Samsung notes.

In the mobile panel business, earnings were similar to the previous quarter on the back of solid sales of premium panels, while the large panel business continued to focus on QD-OLEDs in the premium market.

The Device eXperience division achieved strong profitability due to higher sales of premium TVs and digital appliances, an improved cost structure and increased operational efficiency, it adds.

The Networks Business unit’s revenue declined in major overseas markets, including North America and Japan.

“The weakness of the Korean won against the US dollar, euro and major emerging currencies resulted in a positive impact on company-wide operating profit,” the company says in a statement.

It believes global demand is expected to gradually recover in the second half of the year, which should lead to an improvement in earnings driven by the component business.

However, it notes that continued macro-economic risks could prove to be a challenge in such recovery in demand.

“The DS division will focus on sales of high-value-added products, such as DDR5, LPDDR5x and HBM, amid expectations of a recovery in demand. It will continue to strengthen mid- to long-term competitiveness by increasing investments in infrastructure, R&D and packaging technology, while also enhancing the completeness of the Gate-All-Around process.”

The company’s total capital expenditure in the second quarter stood at KRW 14.5 trillion, including KRW 13.5 trillion for semiconductors and KRW 0.6 trillion for displays.

Spending on memory was concentrated on completing the P3 infrastructure and P4 framework for mid- to long-term supply.

Foundry investments continued to focus on fabs in Taylor, Texas and Pyeongtaek, Korea, to address the demand for advanced nodes, while investments in displays focused on infrastructure and module production enhancements.

The DS Division posted KRW 14.73 trillion in consolidated revenue and KRW 4.36 trillion in operating losses for the second quarter.

The Memory Business achieved its bit growth guidance even as it saw more limited price drops for both DRAM and NAND, which ultimately contributed to a quarter-on-quarter improvement in performance.

“As server customers continued inventory adjustment, overall purchase demand had not yet recovered. Due to the strong demand for generative AI, however, investment from the data centre sector was concentrated on AI servers.”