Samsung Electronics Smartphone 4Q Operating Profit 2.5 Trillion Won... Driven by 5G and Mid-Range Phones

4Q IM Sales 24.95 Trillion KRW, Operating Profit 2.52 Trillion KRW
Flagship Sales Declined but Galaxy A Series Filled the Gap
Galaxy Z Flip and S20 Launch in Q1 to Boost Sales

[Asia Economy Reporter Han Jinju] In the fourth quarter of 2019, Samsung Electronics' IM Division recorded an operating profit of 2.52 trillion KRW. Thanks to 5G smartphones, the Galaxy Fold, and the mid-range Galaxy A series lineup, both sales and operating profit grew compared to the same period last year.

On the 30th, Samsung Electronics announced that its consolidated sales for the fourth quarter reached 59.88 trillion KRW, with an operating profit of 7.16 trillion KRW. The IM Division posted sales of 24.95 trillion KRW and an operating profit of 2.52 trillion KRW. Compared to the same period last year, sales increased by 7%, and operating profit rose by 1.01 trillion KRW (66.88%). For the entire year of 2019, the IM Division's sales increased by 7% year-on-year to 107.27 trillion KRW, while operating profit decreased by 900 billion KRW (8.84%) to 9.27 trillion KRW.

Although sales of flagship models declined, strong sales of the mid-range Galaxy A series helped reduce the decrease in operating profit. Compared to the third quarter, which recorded an earnings surprise, wireless business sales in the fourth quarter fell by 14%, and operating profit decreased by 0.40%. Securities firms estimate fourth-quarter smartphone shipments at around 70 million units, which is less than the previous quarter (85 million units) but appears to be on par with the same period last year.

Samsung Electronics explained, "Wireless business sales declined compared to the previous quarter due to reduced flagship model sales, but operating profit only slightly decreased thanks to efficient marketing expenses during the year-end peak season and maintained profitability of key models such as the Galaxy A series."

Samsung Electronics plans to improve sales by launching numerous new products in the first quarter. The 'Galaxy Z Flip' is scheduled for release in February, followed by the 'Galaxy S20' series in March. This strategy aims to stimulate replacement demand with a more affordable foldable phone compared to last year's Galaxy Fold and the Galaxy S20 series, which features significantly enhanced camera specifications. Additionally, Samsung intends to expand its mid-range lineup, including the Galaxy A51 and A71, in emerging markets such as Southeast Asia, the Middle East, and South America to drive operating profit growth. Alongside this, the 'Galaxy Note 10 Lite' and 'Galaxy S10 Lite' will be launched in Europe between January and February to strengthen the 'quasi-flagship' model lineup between flagship and mid-range categories.

Samsung Electronics stated, "We will expand premium product sales with differentiated foldable products featuring 5G product lines and new designs, while continuously strengthening the mid-range model lineup. Although sales are expected to improve in the first quarter compared to the previous quarter due to the launch of new flagship and foldable products, operating profit is expected to remain at the previous quarter's level due to increased marketing expenses for sales expansion."

Since 5G smartphones began commercializing last year, Samsung Electronics has launched 5G smartphones in various countries including South Korea, the United States, and the United Kingdom. According to market research firm Strategy Analytics, Samsung shipped 6.7 million units, ranking second with a 1 percentage point difference behind Huawei (6.9 million units). Unlike Huawei, which focused on the Chinese domestic market, Samsung achieved balanced sales performance worldwide. Samsung Electronics forecasted, "The smartphone market is expected to grow in demand for 5G smartphones this year, but competition among companies will intensify as key components become more advanced."

This content was produced with the assistance of AI translation services.