Samsung MX & Network Q2 Operating Profit 2.62 Trillion KRW... 20% Decrease YoY

19.1% Decrease Compared to Same Period Last Year
31.4% Decrease Compared to Previous Quarter

[Asia Economy Reporter Minyoung Cha] Samsung Electronics MX (Mobile Experience) and Network Business Division reported a nearly 20% decline in operating profit in the second quarter compared to the previous year due to sluggish smartphone sales and increased costs. The division faced a double burden of rising costs and weakened consumer purchases amid the Russia-Ukraine war and US interest rate hike issues.

On the 28th, Samsung Electronics announced its finalized second-quarter results, reporting consolidated sales of 77.2 trillion KRW and operating profit of 14.1 trillion KRW, similar to the preliminary figures.

Sales of the MX and Network Business Division, responsible for the mobile segment, amounted to 29.34 trillion KRW, with an operating profit of 262 million KRW. The operating profit was 31.4% and 19.1% lower than the previous quarter (3.82 trillion KRW) and the same period last year (3.24 trillion KRW), respectively.

The division's performance contracted as smartphone sales, which largely determine the MX division's results, fell short of expectations. The securities industry estimates that device shipments dropped 19% from the previous quarter to 60 million units. Typically, the second quarter is an off-season due to the absence of new products, compounded by a global industry downturn. Samsung explained, "The impact is due to overlapping macroeconomic issues such as increased material and logistics costs and negative foreign exchange effects."

On the other hand, the network division is observed to be improving, supported by the early growth of the overseas 5G market. According to the Ministry of Science and ICT's ICT export-import statistics, the export value of wireless communication devices, including mobile phones and wireless base stations, reached 7.43 billion USD (9.763 trillion KRW) cumulatively from January to June 2022. This represents a 5.3% increase compared to the previous year. During the same period, exports of wireless communication devices by small and medium-sized enterprises decreased by 22.4%, suggesting that the export growth was mainly driven by large corporations' product lines.

Samsung also achieved export success in network equipment in the second quarter. In May, it signed a contract worth over 1 trillion KRW to supply 5G equipment to DISH Network in the United States. This is the second-largest contract in the US following the agreement with Verizon in September 2020. The exported products include 5G virtualized base stations and radio products such as multiple input-output base stations. In particular, it is analyzed that Korea's success in commercializing 5G for the first time in the world in 2019 has provided momentum. An industry insider noted, "Wireless technology achievements positively influence smartphone device sales, creating a virtuous cycle of sales," adding, "Samsung's network division, which had struggled within the group, is showing a different face in the 5G era."

However, it is anticipated that the third-quarter performance will again depend heavily on smartphones, which account for a large portion of the results. Samsung Electronics is expected to unveil the next generation of foldable phones, the 'Galaxy Z Fold4 and Z Flip4,' at the Samsung Unpacked event in August. Samsung stated, "MX plans to popularize foldable phones by generating sales exceeding those of the Galaxy Note through differentiated consumer experiences based on global partnerships," and added, "We plan to successfully launch new wearable products to expand the Galaxy ecosystem and strengthen overall operational efficiency."

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