Samsung hopes 5G will turn things around in 2020 after a dismal Q4 show
Samsung is looking to invest more on 5G and foldable phones in 2020 as the company’s core chip and display businesses slow down.
Samsung Electronics' struggles have continued as the company reported a 38% drop in profit in the fourth quarter. The company blamed a continuous slump in its memory chip business for the slump in profits and overall net income. Samsung's troubles come at a time when rival Apple has succeeded in turning things around, managing double-digit growths in emerging markets such as India.
Samsung's net income dropped to 5.23 trillion won ($4.4 billion) for the quarter that ended December. This is slightly lower than the projections of 5.31 trillion won for the quarter. Another important highlight from Samsung's quarter earnings report is the slower demand for display business.
This is quite surprising considering Samsung is one of the biggest display makers in the world and has partners like Apple onboard. The company stressed a softer demand owing to sliding prices of the LCD panels, mostly found on mid-range and low-end phones around the world.
Overall, Samsung's semiconductor unit reported a 56% drop in operating income and its display business dropped by 77%.
Mobile division shines
The Korean giant also indicated at a shift in its strategy where it is going to pay more attention to newer technologies such as 5G and foldable devices. The company is gearing up for a Galaxy Unpacked 2020 event on February 11 where it will showcase Galaxy S20 series and a new affordable Galaxy Z Flip foldable phone. Samsung has already embarked upon 5G journey and is likely to intensify the momentum with a wider range of devices across price categories in 2020. The only catch, however, remains the unavailability of 5G in its strong markets such as India.
It is worth noting that Samsung's mobile division was the only one to show an upward trend. The company reported a 67% jump in operating profit from a year prior. The company hopes the trend will stay steady in the coming quarters.
"For the whole of 2020, while demand for 5G smartphones is expected to increase, market competition is also forecast to intensify as manufacturers increasingly adopt high performance components including APs, memory and cameras. In response, the Company plans to differentiate its premium smartphones by expanding 5G adoption and introducing new designs for foldable products," said Samsung in its report.
"Furthermore, Samsung will expand its 5G product portfolio and strengthen product competitiveness of mass-market smartphones by quickly adopting innovative technology based on market needs. With these efforts, the Company aims to improve earnings YoY by expanding sales of premium smartphones and enhancing the competitiveness of its mid- to low-end lineup," it added.
Samsung's woes are in stark contrast to Apple's bullish quarter reports and projects. The iPhone maker reported $91.8 billion (69.8 billion pounds) in revenue for the quarter ended December 28, beating the estimates of $88.5 billion. It has now projected $63.0 billion to $67.0 billion in revenue for the quarter ending in March.
According to a new Counterpoint Research report, Apple gained the top spot in further quarter of 2019 while Samsung slipped to second. In the Calendar Year 2019, however, Samsung maintained the top spot. Huawei came at the second spot for the CY 2019.
Softer first quarter
The tech companies are now looking at a softer first quarter this year. This is primarily because of the outbreak of Coronavirus in China which is one of the key manufacturing hubs for these firms as well as one of the biggest markets. Already, the companies are pulling their staff and even closing offices at some locations in China.
Samsung said its first-quarter earnings could be negatively affected by a virus outbreak in China. Apple is expected to take a big hit as well.