[Concall Summary] Galaxy Sales Down by 7 Million Units... Seeking Turnaround with Note20 and Fold2

Q2 Smartphone Sales Decline... IM Operating Profit Increases by 25%
Seeking to Boost Q3 Sales Through New Product Launches Like Note20 and Fold2

Samsung Electronics announced on the 7th that its consolidated preliminary operating profit for the second quarter reached 8.1 trillion won. On the same day, citizens were seen walking at the Samsung Delight Shop in Seocho-gu. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Han Jinju] Although Samsung Electronics' smartphone sales in the second quarter sharply declined, operating profit increased compared to last year due to the expansion of the mid-to-low-end smartphone lineup and cost efficiency. As smartphone sales recover, Samsung Electronics aims for a turnaround in the 5G smartphone market by leading with the Galaxy Z Fold2 and Note20.

On the 30th, Samsung Electronics announced that its consolidated operating profit for the second quarter increased by 23.5% year-on-year to KRW 8.1463 trillion, while sales decreased by 5.6% to KRW 52.9661 trillion. The IM division, which is responsible for the smartphone business, posted an operating profit of KRW 1.95 trillion and sales of KRW 20.75 trillion. Compared to the same period last year, IM division sales decreased by 20%, but operating profit increased by 25%.

7 Million Units Decrease... Holding Ground with Mid-to-Low-End Phones and Cost Efficiency

Galaxy Note20 Ultra Rendering Image (Source: Roland Quant Twitter)

Smartphone sales were not immune to the impact of the novel coronavirus (COVID-19). Samsung Electronics' global smartphone sales in the second quarter were 57 million units, and tablet sales were 7 million units. Compared to the first quarter, smartphone sales decreased by 7 million units, while tablet sales increased by 2 million units. In other words, the COVID-19 impact hit flagship smartphone sales.

Samsung Electronics explained, "Due to COVID-19, stores in North America and Europe were closed, causing smartphone sales and revenue to decline compared to the previous quarter, but we maintained solid profitability through reduced marketing expenses such as offline promotions and efficient cost management."

For mid-to-low-end smartphones, sales volume was maintained at a level similar to the first quarter thanks to lineup expansion and strengthened cost competitiveness. Samsung Electronics released the Galaxy A31, A51, and A71 (Quantum) consecutively in the domestic market during the second quarter.

Lee Jong-min, Executive Director of the Wireless Business Division, said, "Efforts to optimize the mid-to-low-end lineup operation, which have been underway since last year, are showing visible results in improving model profitability. This year, we expanded 5G adoption to mid-to-low-end products, receiving positive responses from customers and partners, and despite the worsening COVID-19 situation, mid-to-low-end smartphones maintained sales trends similar to the previous quarter."

Seeking a Rebound with Flagship and Foldable Devices

Galaxy Z Fold2 Rendering Image (Source: Ishan Agarwal Twitter)

Samsung Electronics will unveil the Galaxy Note20, Galaxy Z Fold2, Galaxy Tab S7, Galaxy Buds Live, and Galaxy Watch3 through an online Unpacked event on August 5. The new product launch aims to stimulate the pent-up replacement demand. Breaking the formula of annual price increases, Samsung Electronics is making great efforts, pricing the Galaxy Note20 at KRW 1,199,000, the most affordable among 5G smartphones.

Executive Director Lee said, "Although uncertainty remains due to COVID-19, smartphone market demand has shown signs of recovery since June, and 5G smartphones and foldables will stimulate replacement demand and lead the market. The new Galaxy Note model maximizes entertainment and productivity, and the new Fold model has evolved the innovative form factor one step further. We will provide rich and expanded user experiences through collaboration with global top-tier partners."

With the launch of the Galaxy Note20 and Galaxy Z Fold2, sales in the third quarter are also expected to increase significantly. According to Counterpoint Research, smartphone sales in June increased by 33% compared to the previous month. The securities industry forecasts that third-quarter smartphone sales will rise to 68 million units. Apple is scheduled to unveil the 'iPhone 12' series, its first 5G release, in September, which is expected to drive the 5G super cycle and create a synergistic effect between the two companies.

Executive Director Lee said, "With the launch of new models such as the Galaxy Note and Z Fold, product mix will improve, and overall performance in the second half of the year is expected to improve. We will respond promptly to regional demand recovery by strengthening the lineup of flagship new products and mid-to-low-end models, and continue efforts to improve profits through operational efficiency and cost competitiveness."

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