Samsung Electronics released Earning Guidance for estimating second quarter revenues of 2018 on Friday. According to the note, the company expects a gain of 5 percent in the second quarter operating profit this year.
Though the analyst estimates the South Korean tech giant will see a 2 percent drop in sales. The credit for the poor results goes to the failure of its bland flagship Smartphone model Galaxy S9, lack of technological innovation in the phone designs and the strong competition from Chinese phone makers Xiaomi, Huawei, Vivo, and OnePlus. Subsequently, Samsung has lost its grip on the largest consumer markets of India and China.
The world’s largest Smartphone and semiconductor manufacturer estimated an operating profit of 14.8 trillion South Korean won ($13.2 billion) for the April-June quarter, lifted 5% up from 14.07 trillion won ($12.67 billion) generated in June 2017. But the figures reflect poor performance of the company when compared to the results of the March quarter, 2018. Samsung saw the operating profit of 15.64 trillion won ($14 billion) in the first quarter this year.
Furthermore, Samsung anticipates consolidated revenue will drop to 58 trillion won from 61 trillion won earned in the same period of 2017. And this would stop the marathon of four consecutive quarters of record earnings. Also similar to operating profits result in the March 2018 earnings, the Galaxy maker posted 60.56 trillion won ($54.2 billion), approximately 4 percent up from the second quarter revenues of 2018.
Post the announcement of the earnings guidance, Samsung shares dropped 2 percent and they are going 12 percent down overall this year. The company predicted the similar results in April while sharing the first quarter results. Samsung will report the concrete Q2 results by the end of July month.
Memory Business Balancing Samsung
On a positive note, the South Korean tech giant will post seventh straight record earnings in the other cash cow business of memory chipsets. Its profits are reaped from a sturdy global demand for DRAM chips and NAND chips which account for about a third of the company revenues. It is further expected to grow because of the expansion of data centers in the USA and China. Yet, here too, there is a fear of Chinese electronics manufacturers as they are the leading importers of memory chips and they can impose upper hand while setting the prices in near future.
Few analysts have forecasted that Samsung will rebound in second half of the year, thanks to the release of a new model Galaxy Note 9 comprising fresh features in August. “Overall, third-quarter profit will be stronger than the second quarter as Samsung will perform better in the semiconductor and display businesses,” said Song Myung-sup, an analyst at HI Investment & Securities.