At first glance, Samsung’s latest full financial results
are nothing short of spectacular, with the semiconductor, smartphone, tablet, smartwatch, TV, and home appliances giant flaunting a new all-time second-quarter revenue record to keep investors happy and media coverage (largely) positive.
But while the company’s operating profit is also on the rise year-on-year, from 12.57 trillion Korean won in Q2 2021 to KRW 14.1 trillion (10.8 billion US dollars) between April and June 2022, at least one pivotal division is not doing great from the always crucial profitability standpoint.
What’s going wrong?
This is, you’ve guessed it, the mobile (aka MX and Networks) business, which did manage to yield a more than decent 29.34 trillion won in consolidated revenue while posting a fairly modest gain of around $2 billion during this year’s second calendar quarter.
That’s KRW 2.62 trillion in operating profit for Samsung’s industry-leading smartphones
, down from 3.24 and 3.82 trillion won in Q2 2021
and Q1 2022
respectively. Before you even think it, you should know that both the Galaxy S22 and Galaxy Tab S8 families of ultra-high-end mobile devices are specifically highlighted as “solid” performers in the tech giant’s latest financial report, which means that the division’s problems might lie elsewhere.
The S22 Ultra is a hit, according to multiple different sources.
The underwhelming and tardy Galaxy S21 FE
and the not-so-value-packed newest members
of the mid-range Galaxy A lineup are just the first suspects that come to mind, although Samsung is obviously not naming and shaming any low-performing products, instead blaming more general (and generic) things like the “rising costs of components and logistics as well as negative effects of foreign exchange movements” for “some degree” of the shrinking profits of its mobile business.
Meanwhile, “prolonged geopolitical issues and economic uncertainties” could cause revenues to stay “similar year-on-year” during the second half of 2022, when the Galaxy Z Fold 4 and Z Flip 4 are however expected to post “solid profitability.”
Reserve the Galaxy Z Fold 4 and Z Flip 4 right now
In other words, Samsung
is bracing for stagnant smartphone sales and higher profit numbers after its next big foldables
are released, which is probably better than seeing revenue go up and profits go down.
Another challenging few months ahead
Intriguingly, the company is using the term “mainstream” not once and not twice but three times in relation with its “new foldable models” (which are technically not named), strongly suggesting that the Z Flip 4 and Z Fold 4’s shipment figures
will come close to the historical “mainstream” results of the defunct Galaxy Note family.
It looks like we’re officially entering a new chapter in the evolution of the mobile industry, and despite so many political and economic hurdles, Samsung is ready to keep making the big bucks off phones… in addition to memory chips and displays.
The Galaxy Z Flip 4 is expected to sell like hotcakes soon.
The always thriving memory business
(included in the larger Device Solutions division), in case you’re wondering, unsurprisingly generated the largest chunk of Samsung’s operating profit in the April – June 2022 timeframe as well.
We’re talking a whopping KRW 9.98 trillion in the green, which roughly converts to 7.7 billion US bucks, improving the division’s already monumental profit scores of 6.93 and 8.45 trillion won posted back in Q2 2021 and Q1 2022 respectively.
But while server demand should remain solid through the end of the year as far as memory products are concerned, the PC and mobile market slumps could impact this business too, at least to a certain degree.
Samsung is interestingly mentioning smartwatches as well for… possibly the first time ever in one of its overall financial outlooks, predicting “high growth momentum with the release of new” models (hey there, Galaxy Watch 5 and Watch 5 Pro
!) in spite of “short term economic uncertainties” that are also expected to affect this global market… to a certain degree.