Galaxy is the 'Top Contributor'... Note20 Led the Way and Tab Followed

Samsung Electronics Q3 Preliminary Earnings Announcement... IM Operating Profit Expected at 4.5 Trillion Won
Increased Smartphone and Tablet Shipments, Huawei Weakness and iPhone Delay Effects
Higher Product Sales and Reduced Marketing Costs Lead to Mid-10% Operating Margin

Samsung Electronics IM Division Quarterly Sales and Operating Profit. The third quarter is a forecast.

[Asia Economy Reporter Han Jinju] Samsung Electronics' third-quarter earnings surprise was driven by smartphones playing a key role, with the Galaxy Note20 delivering a standout performance. Tablets also exceeded expectations in sales, resulting in the IM division's operating profit for Q3 increasing by 130% compared to the previous quarter. Despite the COVID-19 pandemic, new products received favorable reviews, and a combination of Huawei's slump and delays in the iPhone new product launch contributed to this outcome.

Galaxy Note20 and Other Major Products' Blockbuster Run

Samsung Electronics announced its preliminary Q3 results on the 8th, reporting sales of 66 trillion KRW and operating profit of 12.3 trillion KRW. Of this, the IM division is estimated to have achieved sales of 31 trillion KRW and operating profit of 4.5 trillion KRW. This is more than double the previous quarter's operating profit (1.95 trillion KRW). The strong performance was thanks to major product lines such as the Galaxy Note20, Galaxy Z Fold2, and Galaxy Tab S7 series creating a buzz from pre-orders onward.

Despite the ongoing impact of COVID-19, sales volumes matched or exceeded those of previous models, and tablet sales surged significantly due to remote work and online education. The securities industry estimates Q3 smartphone shipments at 80 million units and tablets at 10 million units. Compared to Q2, phone shipments increased by 23 million units and tablets by 3 million units. Reduced marketing expenses due to COVID-19 also greatly contributed to the improvement in operating profit margin, which is expected to rise significantly from 9.4% in Q2 to 16.3%.

Externally, the U.S. government's escalating sanctions on Huawei slowed Huawei's smartphone shipments, allowing Samsung to benefit from the spillover effect. Strategy Analytics stated, "Next year, Huawei's smartphone shipments will sharply decline, solidifying the duopoly of Samsung Electronics and Apple." Furthermore, anti-China sentiment spreading in India has increased Samsung Electronics' smartphone market share. According to Counterpoint Research, Samsung held the number one smartphone market share in India for three consecutive months from June to August. The market share rose from 22% in August last year to 26% this year. Positive news is also expected to continue in the telecommunications equipment sector, starting with the Verizon contract.

Song Myungseop, a researcher at Hi Investment & Securities, explained, "The increase in smartphone shipments reflects the beginning impact of Huawei's shipment slump, and as seen in the recent Verizon contract, Samsung Electronics is likely to be the competitor that captures the largest market share in the telecommunications equipment market."

Decline in Flagship Share, Slight Decrease in Q4 Earnings Expected

However, the declining proportion of flagship sales could lead to a decrease in profit margins. While the mid-range phone lineup has been strengthened to support overall shipment volumes, Galaxy Note20 sales are expected to fall short of the target (6 million units), reaching 5.3 million units. Kim Sunwoo, a researcher at Meritz Securities, said, "The revenue share of flagship smartphones has not grown meaningfully, and although mid-range models have been included in the Galaxy S and Note lineups to capture a broader consumer base, sales volumes continue to shrink compared to previous models."

The iPhone 12 launch is scheduled for mid-month, and marketing expenses to defend market share are expected to increase from Q4, reducing operating profit to the 3 trillion KRW range. Samsung Electronics has released the Galaxy S20 FE priced in the 800,000 KRW range as a competitor to the iPhone 12 and has increased the official subsidy for the Galaxy Note20 up to 500,000 KRW to focus on defending market share. An industry insider explained, "With shipments concentrated in Q3, Q4 shipments will decrease, and the reduction in the proportion of high-end phones may lower profit margins."

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