Troubled Korean tech giant Samsung Electronics Co. continued to struggle in the three months ended March 31st as its mobile division, once its key profit driver, saw another quarter of sluggish smartphone sales, while the semiconductor division reaffirmed its role as biggest earnings contributor.
Samsung reported revenue of KRW 47.12 trillion, compared to 52.73 trillion in the previous quarter and 53.68 trillion a year earlier. Operating profit improved to KRW 5.98 trillion from 5.29 trillion in Q4 2014, but trailed year-ago performance of 8.49 trillion.
Net profit plunged to 4.63 trillion won, down 13.5% from the previous three months and 39% lower from a year earlier, trailing analysts projections for a 30% drop.
Samsungs mobile division generated sales of KRW 24.99 trillion, down only 0.1% from a quarter earlier, but a hefty 20% drop from a year earlier. Operating profit at the smartphone unit, however, rose to 2.74 trillion won from 1.96 trillion in the fourth quarter, although still being less than half of what it generated a year earlier, due to decreased marketing expenses and better sales of new mid and low-end smartphones.
The Korean companys smartphone sales tumbled in the second half of 2014 as it lost market share in the low-end segment to low-cost Chinese competitors, including Xiaomi Corp., while Apple dominated the premium segment with its latest large screen models. The Cupertino, California-based company said earlier this week it sold 61.2 million iPhones in the quarter through March, up 40% from a year earlier, and registered a 33% surge in net profit.
Samsung warned that sales of non-premium smartphones were likely to fall in the second quarter but also underscored its confidence that profit at the smartphone division will improve, counting on strong sales of the Galaxy S6 and its curved brother the S6 Edge. The new models went on sale earlier this month and received much warmer reviews than their predecessor, which, among other features, was criticized for its plastic body. Analysts say Samsungs new flagships could account for as much as 25% of total smartphone sales in the second quarter.
A point for strong growth continued to be the companys semiconductor division, which remained the biggest profit driver for a third straight quarter. It generated an operating profit of KRW 2.93 trillion, 49% of the companys total. This compared to 2.7 trillion won during the previous three months and was 50% higher than the KRW 1.95 trillion registered a year earlier.
The semiconductor business is expected to continue growing, receiving an extra boost from Samsungs Exynos mobile processors used in the S6 lineup, coupled with increased demand for microprocessors from Apple in the second half. Some analysts predict chip margins could rise to the highest in five years and near 30% toward the end of the year.
The Device Solutions business, which includes the semiconductor and display panel units, generated almost 57% of the companys total operating profit for the period.
“With premium smartphone sales entering into full swing, the components division is expected to see demand in growth for its semiconductor products,” the South Korean company said.
Samsung Electronics Co. settled 1.39% higher on Wednesday in Seoul at KRW 1 385 000 per share.
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