Galaxy S20's Weak First Quarter... Defending with 'A Series' in Second Quarter

Q1 Operating Profit Hits 2.6 Trillion Won... Increase from Last Year Due to Reduced Marketing Costs
Seeking Turnaround with Successive Launches of Mid-Range 5G Galaxy A Series
"Plan to Strengthen Online and B2B Channels and Promote Cost Efficiency"

[Asia Economy Reporter Han Jinju] Samsung Electronics' IM division achieved better operating profit than last year despite a decline in sales of its flagship product, the 'Galaxy S20.' As the impact of the novel coronavirus disease (COVID-19) intensified in the second quarter, the company plans to offset the flagship's sluggish performance with the mid-range Galaxy A series and focus on operational efficiency.

In the first quarter, Samsung Electronics' IM division, responsible for smartphones and tablets, recorded sales of 26 trillion KRW and an operating profit of 2.65 trillion KRW. Although smartphone sales decreased compared to the previous quarter, marketing costs were reduced, resulting in sales dropping by 1.2 trillion KRW year-on-year but operating profit increasing by 380 billion KRW. Samsung Electronics explained, "Due to the spread of COVID-19 at the end of the first quarter, smartphone sales declined compared to the previous quarter, but the launch of flagship products such as the Galaxy S20 and Z Flip, along with efficient marketing operations, improved profits compared to both the previous quarter and the same period last year."

The decline in smartphone sales in the first quarter was largely due to the sluggish performance of the Galaxy S20. Early results for the Galaxy S20 reached only 50% of its predecessor (Galaxy S10), and including unlocked units, about 80%. Consumer sentiment was dampened by COVID-19, demand was dispersed by the Galaxy Z Flip, and low official subsidies from carriers combined to cause a sharp drop in sales.

The second quarter is expected to see a significant impact from COVID-19, making a decline in performance inevitable. Securities firms estimate second-quarter smartphone sales at 60 million units, down more than 15 million units compared to the same period last year. Samsung Electronics plans to release mid-range phones Galaxy A31, A51 5G, and A71 5G domestically in May. These mid-range smartphones, equipped with key features such as quad cameras, large screens, and high-capacity batteries, are part of a strategy to compensate for flagship sluggishness both domestically and internationally. The Galaxy A series will also be launched in the U.S. and Japan, where 5G is commercialized, to increase market share.

Meanwhile, competition among companies to recover from sluggish sales is expected to intensify in the second half of the year. The industry forecasts that smartphone sales this year will hit the lowest level in the past decade, with Samsung Electronics' annual smartphone sales expected to reach about 250 million units.

Samsung Electronics stated, "Although a decline in performance is inevitable in the second quarter, we plan to strengthen online and B2B channels and promote cost efficiency. We will enhance competitiveness by expanding the introduction of premium new models such as foldable phones and Note series, as well as mid-range 5G smartphones, and improve overall operational efficiency in production, supply, channels, and marketing."

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