Samsung Galaxy Phones Sell 11 Million Fewer Units... More Concerning Q2 Outlook (Comprehensive)

Smartphone Sales Decrease by 11 Million to 64 Million in Q1
Performance Holds Up Thanks to Premium Model Sales and Cost Efficiency
Q2 Demand Plunge Due to COVID-19 Unavoidable... "Strengthening Online and B2B"
"Expanding Competitiveness of Mid-Range Phones... Note and Fold New Models to Launch Without Delay"

[Asia Economy Reporter Han Jinju] Samsung Electronics was not able to avoid the impact of the novel coronavirus disease (COVID-19) in the first quarter. Smartphone sales dropped by more than 10 million units, and although performance was defended through cost efficiency, the outlook for the second quarter is even darker. Samsung Electronics' strategy is to strengthen its mid-to-low-end smartphone lineup and to launch premium products without delay in order to minimize risks caused by COVID-19.

On the 29th, Samsung Electronics announced that its consolidated sales for the first quarter of 2020 reached 55.33 trillion KRW, with an operating profit of 6.45 trillion KRW. The IM division, which is responsible for the mobile business, recorded sales of 26 trillion KRW and an operating profit of 2.65 trillion KRW in the first quarter. While the IM division's sales decreased by 1.2 trillion KRW compared to the same period last year, operating profit increased by 380 billion KRW.

The decline in sales volume is clearly reflected in the figures. In the first quarter, Samsung Electronics' global smartphone sales were 64 million units, and tablet sales were 5 million units. Compared to the previous quarter, smartphone sales decreased by 11 million units, and tablet sales decreased by 2 million units. In the second quarter, smartphone sales are expected to decline further compared to the first quarter, while tablet sales are expected to increase. However, Samsung Electronics explained that the higher proportion of high-end model sales allowed for greater profits.

Jongmin Lee, Executive Director of Samsung Electronics' Wireless Business Division, said, "The sales proportion of the Galaxy S20 Ultra model was higher than expected, and the strong sales of the Galaxy Z Flip led to a significant increase in the ASP (average selling price) of flagship models compared to previous years. Although smartphone sales decreased compared to the previous quarter due to supply chain issues and movement restrictions caused by COVID-19, the product mix improved due to the increased sales proportion of premium and 5G models, and profitability was maintained at a good level through efficient marketing."

The impact of COVID-19 is fully reflected in the second quarter, and the smartphone market is expected to suffer greater damage. Lee said, "As the global spread of COVID-19 continues, economic recession and consumer sentiment deterioration due to global lockdowns are expected to cause a sharp decline in demand for smartphones in most regions in the second quarter. Direct impacts such as store closures will continue, making a decline in major product sales and performance inevitable." He added, "Given the unprecedented market uncertainty, we will focus on strengthening online and B2B channels and promoting cost efficiency."

Samsung Electronics plans to expand its 5G smartphone lineup with mid-to-low-end products and increase sales with competitive products. At the same time, the flagship lineup for the second half of the year, including the Galaxy Note20 and Galaxy Fold2, will be launched as scheduled without changes.

Lee said, "To provide innovative experiences at various price points, we have applied new technologies to the Galaxy A series and M series to enhance product competitiveness and strengthen the portfolio by price range. In the 5G era, we plan to continuously introduce new 5G models equipped with large screens, multi-cameras, high-quality selfies, and high-capacity batteries, expanding mid-to-low-end model sales by meeting diverse customer needs and broadening choices."

Lee added, "We are preparing the new Note model and foldable model for release in the second half as planned. To respond to retail store closures, we are focusing on online sales and are fully prepared across supply and channels. We will monitor and respond promptly to demand recovery by region."

Samsung Electronics is closely monitoring the possibility that the 5G deployment and commercialization schedule may be delayed due to COVID-19, which could negatively affect the network business if prolonged. Lee said, "China is accelerating 5G deployment to stimulate domestic demand, while lockdown measures due to COVID-19 in the US and India are delaying base station installations and 5G frequency auctions. Europe is also expected to experience delays in frequency auctions and commercialization."

He continued, "Domestic carriers are continuing to expand their nationwide 5G networks, and major overseas carriers are actively commercializing 5G. However, if COVID-19 prolongs and expands, there is a possibility that 5G investments by domestic and overseas carriers will be delayed, which could negatively impact the business if prolonged."

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