Samsung just posted its preliminary quarterly earnings guidance report ahead of a full earnings report they are expected to release for the first quarter of 2019. Samsung posted a preemptive “warning” to investors before the release of its earnings guidance report (via Reuters), which Samsung released today.
The report shows that the company is going to miss revenue expectations and post a significant year-over-year drop in profit. According to the report, Samsung has seen an operating profit of as much as 6.3 trillion Korean won (~$5.5 billion) for January through March of this year. That is a drastic drop from the same time period in 2018 when Samsung posted an operating profit of 15.64 trillion won (~$13.8 billion). That represents a very concerning 60 percent drop in profit.
Other than Samsung’s phone lineups ranging from feature through midrange to flagship series lines, Samsung makes most of its money from supplying components like displays, drives chips, etc. to other manufacturers.
Samsung supplies the displays used on many flagship phones like the Pixel 3 and also Apple’s iPhone range including the iPhone Xs and Xs max.
iPhone sales have dropped drastically since Apple launched the iPhone XS. iPhone sales dropped 15 percent as of January 2019 which caused Apple’s revenue from iPhone sales to nosedive $9 billion dollars. The drop caused Apple to drop prices and cut production. It also motivated Apple to go the services route it has taken, unveiling the News, Credit card and TV services amongst others about two weeks ago.
iPhone production cuts also mean cuts in Apple’s demand for Samsung Pannels which means dips in revenue Samsung is making from selling its displays.
All in all, things will only get worse for Samsung if the industry as a whole doesn’t turn around.
Samsungs effort to remedy the situation brought to life a new concept smartphone, the Samsung Galaxy Fold. The Samsung Galaxy Fold launch was to show the possibility of a new kind of smartphone, bendable phones which so many phone manufacturers are getting into including Huawei, Xiomi, and others though most of them are still under development. Samsung hopes and will probably be the only supplier of bendable displays for that emerging market. That is why the company is pushing so hard for foldable devices and reports of two more foldable phones from Samsung are in the works.
We’ll know more specifics about Samsung’s quarterly earnings when it releases its full report soon.