Samsung Q3 IM Performance Driven by Foldable Phones

Samsung Electronics Q3 Preliminary Earnings Announcement

Samsung Electronics announced on the 8th that it recorded sales of 73 trillion won and an operating profit of 15.7 trillion won in the third quarter. This is the first time quarterly sales have exceeded 70 trillion won. On the same day, citizens are seen passing by at the Samsung Electronics Delight Shop. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Koo Eun-mo] Samsung Electronics' IT & Mobile (IM) division, responsible for the smartphone business, is expected to recover operating profit in the high 3 trillion won range thanks to the success of the 3rd generation foldable smartphones ‘Galaxy Z Fold3’ and ‘Galaxy Z Flip3’ launched last August.

On the 8th, Samsung Electronics announced its preliminary Q3 business results for this year, recording sales of 73 trillion won and operating profit of 15.8 trillion won. Compared to Q3 last year (sales of 66.96 trillion won, operating profit of 12.35 trillion won), sales increased by 9.0% and operating profit by 27.9%. The preliminary results have not yet been finalized through accounting settlement but are provided to assist investors.

Samsung Electronics did not disclose results by division on this day, but the IM division is expected to post operating profit in the range of 3.5 trillion to 3.9 trillion won, which is below the same period last year (4.45 trillion won) but improved compared to the previous quarter (3.24 trillion won).

In Q2, the IM division faltered due to market contraction caused by the resurgence of COVID-19. Smartphone sales dropped by more than 20% compared to the previous quarter due to decreased demand in India and other regions, and production disruptions at the Vietnam factory reduced smartphone shipments from 76 million units in Q1 to about 60 million units. Additionally, supply shortages of application processors (AP) for some models also had an impact.

However, in Q3, despite factors lowering profit margins such as rising component prices, increased marketing expenses due to foldable phone launches, and rising international logistics costs, the component shortage that had persisted since Q1 was somewhat alleviated, leading to improved performance. Smartphone shipments are estimated to have increased to about 69 million units. According to market research firm Counterpoint Research, Samsung Electronics’ smartphone sales in August reached 21.41 million units, a 12% increase from July, reflecting eased production disruptions.

Most notably, the launch of the 3rd generation foldable smartphones Z Fold3 and Z Flip3 appears to have contributed to profit improvement. As of the 4th, domestic sales of the Z Flip3 and Z Fold3 exceeded 1 million units, with total sales surpassing 3 million units. Samsung Electronics stated, “Demand has exceeded market expectations,” adding, “Especially, the Galaxy Z Flip3 accounts for about 70% of sales, leading the popularization of foldable phones.” Previously, Samsung Electronics postponed the pre-order period twice for the first time.

With foldable phone sales performing well, and the next-generation flagship smartphone ‘Galaxy S22’ preparing for release early next year, the IM division’s performance improvement trend is expected to continue for the time being. Lee Kyu-ha, a researcher at NH Investment & Securities, said, “Despite sluggish global smartphone demand and shipments, Samsung Electronics’ foldable Galaxy Z series sales remain solid,” and “Production is still insufficient, so continuous sales growth is expected in the future.”

Meanwhile, Samsung Electronics will strengthen communication with investors by accepting preliminary inquiries about management status on its website until the earnings conference call on the 28th.

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