A Strong Q2... Targeting a 'Super Cycle' with Note20 and Fold2

Operating Profit of 1.95 Trillion KRW in Q2, Up 25% YoY
Smartphone Sales and Revenue Declined but Cost Efficiency Improved
Need to Drive Replacement Demand with Galaxy Note20 and Fold2 in Q3
Expecting Synergy Effect with iPhone...Sales Volume Projected to Increase by 24%

Galaxy Note20 Ultra Rendering Image (Source: Roland Quant)

[Asia Economy Reporter Han Jinju] Samsung Electronics aims to rebound in the third quarter, when the smartphone market enters a recovery phase, with its flagship products such as the Galaxy Note20 and Z Fold2. There is also high expectation that in the second half of the year, amid the 5G smartphone market joined by Apple, a 'super cycle' will emerge, driving the replacement demand that has been suppressed so far.

On the 30th, Samsung Electronics announced that its operating profit for the second quarter was 8.1463 trillion KRW, with sales of 52.9661 trillion KRW. The IM division, which is responsible for the smartphone business, posted an operating profit of 1.95 trillion KRW and sales of 20.75 trillion KRW. Compared to the same period last year, IM division sales decreased by 20%, but operating profit increased by 25%.

Despite the harsh second quarter due to the impact of the novel coronavirus (COVID-19), Samsung Electronics successfully overcame it through cost efficiency and expansion of the mid-to-low-end smartphone lineup. Samsung Electronics stated, "Although smartphone sales volume and revenue declined compared to the previous quarter due to store closures caused by COVID-19, we maintained solid profitability," adding, "We will continue efforts to improve profitability through the launch of new flagship models such as Galaxy Note and Fold, expansion of mid-to-low-end model sales, and operational efficiency."

Table. Samsung Electronics IM Division Quarterly Performance

Samsung Electronics will unveil flagship new products such as the Galaxy Note20 and Z Fold2 at the Unpacked event on August 5. The first batter 'Fold2' and the fourth batter 'Note20' must lead the suppressed replacement demand. This is an opportunity to create a 'super cycle' to induce the transition to 5G smartphones. With Apple set to unveil its 5G iPhone in September, a synergistic effect between Samsung and Apple is also expected. Samsung plans to lower the entry barrier by pricing the Galaxy Note20 at 1,199,000 KRW, the most affordable among 5G smartphones. Apple is also likely to price around 1,000 USD (approximately 1.19 million KRW).

The smartphone market has clearly entered a recovery phase since June, and sales and shipment volume are expected to rebound with the launch of flagship models. According to Counterpoint Research, smartphone sales in June increased by 33% compared to the previous month. This also indicates that consumer sentiment is gradually recovering. In the securities industry, Samsung Electronics' smartphone sales are expected to have decreased by about 15% to 54.8 million units in the second quarter compared to the previous quarter, but are projected to expand to 68 million units in the third quarter.

Kim Kyungmin, a researcher at Hana Financial Investment, analyzed, "Sales volume is expected to grow by about 24%, and sales of mid-to-low-end products will also be strengthened," adding, "Considering that profitability was maintained despite a mid-to-low-end focused sales strategy in the second quarter, although there is a possibility of increased costs, operating profit in the third quarter is also expected to increase by about 28%."

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