Cooling phone demand weighs on Samsung despite chip boost

SAMSUNG Electronics felt the chill of a cooling smartphone market, causing its mobile business to record its sharpest profit decline since the first quarter of 2017.

Poor demand for expensive, highend mobile phones and tough competition from Apple and Chinese players resulted in sluggish sales of its flagship Galaxy S9 and S9+, the Korean manufacturer said. However, the disappointing figures were bumped up by strong demand for Samsung Electronics’ memory chips and premium TVS.

Its semiconductor unit, which dominates the global market, provides chips for the company’s own devices as well as those of competitors including Apple. Samsung has suffered a number of setbacks including an embarrassing and costly global recall of its Galaxy Note 7 after its batteries began exploding in 2016. Scandals among its executives have also made headlines.

Vice-chairman Lee Jae-yong was jailed last year for his part in the corruption scandal that brought down former president Park Geun-hye. Mr Lee has since been released after some of his convictions were quashed on appeal. Despite this, the company has posted record profits in recent until now.

Samsung Electronics’ operating profit was 14.9 trillion won (£10.1bn) in the second quarter, slightly ahead of its 14.8 trillion won estimate, the company said in a regulatory filing.

The semiconductor business achieved record operating profits of 11.6 trillion won but missed market forecasts averaging 12 trillion won. quarters, Comparatively, the mobile business was struck with a 34pc fall in operating profit to 2.7 trillion won in the same period, its biggest decline since the first quarter of 2017, when the Galaxy S7, Samsung’s flagship model, was launched.

“Second-quarter revenue fell due to softer sales of smartphones and display panels,” Samsung said in a statement. To calm investors, Samsung will now push out a new phablet, the Galaxy Note 9, earlier than expected to boost profits ahead of the Christmas shopping period. Rival Apple is expected to launch its flagship phone in September, which will compete for market share. Samsung’s new phone will attract buyers “at a reasonable price” while it will pack its middle and lowend products with updated features to fend off competition, it said.