Samsung's Q4 2018 smartphone profits were the lowest in more than two years

Samsung's Q4 2018 smartphone profits were the lowest in more than two years
Global smartphone sales are down (and unlikely to bounce back in the next few quarters), impacting the bottom line of both Apple and Samsung while Huawei somehow continues to defy market trends.

The final three months of 2018 have been particularly problematic for Samsung, as the mediocre performance of the chaebol’s mobile division could no longer be offset by the semiconductor business.

That’s because demand for memory chips is also sliding, a trend likely to continue in the early stages of 2019. All in all, Samsung did manage to generate a solid Q4 2018 operating profit of 10.8 trillion won ($9.7 billion), which contributed to a new record-breaking yearly result of around $52.7 billion.

But both fourth-quarter sales and profits were down substantially year-on-year, as well as quarter-on-quarter. Typically, the holiday season is the most lucrative period (especially for consumer-oriented businesses), but Samsung’s smartphones, chips, and displays seriously struggled this October - December timeframe.

In fact, the IT & Mobile Communications Division (IM) recorded its lowest scores in more than two years. Specifically, an operating profit of $1.35 billion or so on the back of $20.8 billion consolidated revenue. That’s lower than the division’s Q4 2017 and Q3 2018 results, and believe it or not, it’s lower than Q4 2016 and Q1 2017 results as well.

Naturally, Samsung blamed this decline primarily on a “sluggish smartphone market overall”, claiming “seasonal demand” was pretty much as “strong” as always. But just like Apple, it’s obvious the company has a China problem it needs to tackle ASAP. Also, a mid-range problem and a lack of innovation in the high-end segment problem.

While smartphone and tablet demand is projected to drop a little further in the first quarter of 2019, Samsung expects its “new flagship model smartphones”, Galaxy S10 included, to “prop up sales and business performance in the coming months.”

For the entire year, Samsung smartphone shipments are forecasted to remain largely flat, with ASP (average selling prices) likely to go up thanks to a “trend toward adopting high-end features such as large screens, higher memory capacity, and multi-cameras.” That means mobile division profits should surge as well, but it’s far too early to take that prediction very seriously.

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