Best Buy Exits and Verizon Re-enters... What Does the Change in Samsung Electronics' Top 5 Customers Mean?

Best Buy Excluded from Top 5 Customers After 8 Quarters
Due to Weak Appliance Demand Amid High Inflation

[Image source=Yonhap News]

[Asia Economy Reporter Han Yeju] Best Buy, the world's largest home appliance retailer, has dropped out of Samsung Electronics' top five major customers. Meanwhile, Verizon, which was excluded from the top five customers in the first quarter, has successfully re-entered. The top five customers account for about 15% of Samsung Electronics' total sales.

According to Samsung Electronics' semi-annual report disclosed on the Financial Supervisory Service's electronic disclosure system on the 17th, the top five major customers in the first half of this year are Apple, Deutsche Telekom, Qualcomm, Supreme Electronics, and Verizon. The combined sales proportion of these top five customers was about 14% in the first quarter, increasing by 1 percentage point to 15% in the first half.

The composition of the top five customers includes one finished product competitor (Apple), one component competitor (Qualcomm), two telecom companies (Deutsche Telekom and Verizon), and one distributor (Supreme Electronics).

Best Buy is a home appliance retailer centered in North America and has been one of Samsung Electronics' largest customers. Best Buy was consistently among the top five customers annually for the past three years (2019?2021) because Samsung Electronics' Visual Display (VD) and home appliance divisions accounted for about 20% of sales. For the same reason, Best Buy held a spot among the top five customers in the first quarter as well.

However, with the VD and home appliance divisions experiencing negative growth in the second quarter, it is interpreted that Best Buy's share has also shrunk. In fact, Best Buy lowered its sales forecast for the second quarter and began reducing staff across stores nationwide in the U.S.

Kim Young-moo, Executive Director of Samsung Electronics' VD division, mentioned at the '2022 Earnings Conference Call' held last month that "performance declined due to worsening consumer sentiment and intensified competition."

Verizon, a U.S. telecom company that was excluded from the top five customers in the first quarter, reappeared among the top five customers after just one quarter. Best Buy, the largest online home appliance retailer in the U.S., which was included in the top five customers in the third quarter of 2020 due to the COVID-19 pent-up demand effect, dropped off the list after seven quarters. This is analyzed to be due to reduced home appliance demand amid severe recent inflation.

Qualcomm, which entered the top five customers for the first time in the first quarter, maintained high sales in the first half as well. Qualcomm is a major client of Samsung Electronics' foundry (semiconductor contract manufacturing), entrusting production of mobile chips such as the Snapdragon 8 Gen 1 to Samsung Foundry. Although production of the successor Snapdragon 8+ Gen 1 was moved to Taiwan's TSMC, communication chips and others are still produced at Samsung Foundry, so the sales proportion is still considered significant.

Apple is a key customer symbolizing Samsung Electronics' unique business structure. The DX (Device Experience) division, responsible for finished products like smartphones, competes with Apple in the flagship smartphone market, but the DS (Device Solutions) division, which handles components, supplies major parts such as memory semiconductors and displays to Apple products.

Supreme Electronics, a Taiwanese semiconductor distributor that first entered the top five customers in the second half of 2021, also maintains its position among the top five customers. The company mainly supplies semiconductors to Chinese and Taiwanese firms.

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