Samsung still remains the world’s No. 1 smartphone maker with more than a fifth of the global market, but it is currently facing increasing pressure from Chinese rivals such as Xiaomi Inc. and Oppo Electronics Corp., which sell similar devices at a cheaper price point.
After seven quarters of record profits, it looks like things are about to change for Samsung. The South Korean tech giant recently released its earnings guidance of 14.8 trillion South Korean won ($13.2 billion) in operating profit from 58 trillion won (51.8 billion) in revenue for the second quarter of 2018. Samsung will report final results for Q2 later this month.
While the guidance shows an 11 percent increase in profit year over year, it also shows a 0.7 percent decrease in overall sales for the period ending June 30. The guidance is a far cry from analysts’ predictions of a 60.3 trillion won revenue with 15.1 trillion won in profit.
Industry analysts believe the lower-than-expected figures for the second quarter can be attributed to low sales of the Samsung Galaxy S9 as well as pricing volatility for memory chips.
According to Lee Seung-woo of Eugene Investments, sales of the Galaxy S9 have been sluggish. He expects the Samsung to ship about 31 million Galaxy S9 handsets in 2018. That number falls far below Samsung’s sales target of 43 million Galaxy S9 handsets.
In addition to slow sales for the Galaxy S9, analysts also believe pricing volatility for memory chips could be wreaking havoc on Samsungs earnings for the second quarter. Much of Samsung’s earnings success over the last four quarters can be attributed to its thriving components business.
Samsung Electronics became the No. 1 supplier of semiconductors worldwide in 2017 and its sales of memory chips continue to outpace its competitors by a long shot. However, prices for NAND memory has fallen drastically in recent months and analysts believe DRAM chips will fall 10 to 15 percent in the coming months as well.
Slow sales and components pricing may not be Samsung’s only challenges in the coming quarters. Earlier in 2018, it was believed the majority of Apple’s upcoming 2018 iPhone models would use Samsung’s OLED displays. However, analysts now believe a greater proportion of the upcoming handsets will have less expensive LCD displays.
Samsung may see a boost in fourth-quarter sales, though. The company is expected to announce new hardware in August, including the Galaxy Note 9, Samsung Gear S4, and Samsung Galaxy Tab S4. The products would likely go on sale at the end of the third quarter in time for the holiday shopping season.