Samsung Electronics misses forecast on lower phone sales

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Samsung has posted its slowest quarterly profit growth in more than a year as the sluggish global smartphone market weighed on earnings. In this image, employees walk past a Samsung logo  at its office in Seoul, South Korea


Samsung posted its slowest quarterly profit growth in more than a year on Tuesday, but has promised that forthcoming folding smartphones and unbreakable screens will help to boost its business in the coming months.

Operating profit for the world’s largest chipmaker and smartphone manufacturer rose 5.7 per cent to £10.14 billion ($13.3 billion) in the second quarter, Samsung said in a regulatory filing, compared with £10.06 billion ($13.2 billion) it had estimated.

The company, which provides components for technology giants including Apple, said operating profit from the mobile business plunged 34 per cent from a year ago.

However, it added that flexible OLED technology – which Samsung claims to have been developing for future devices for almost five years – would help the technology firm to rebound in the second half of the year.

The comment during the quarterly earnings call fuels ongoing rumours Samsung is preparing to launch a folding smartphone with a bendable display to try to tempt away customers from the rival Apple iPhone X.

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Samsung has posted its slowest quarterly profit growth in more than a year as the sluggish global smartphone market weighed on earnings. In this image, employees walk past a Samsung logo  at its office in Seoul, South Korea

Samsung has posted its slowest quarterly profit growth in more than a year as the sluggish global smartphone market weighed on earnings. In this image, employees walk past a Samsung logo at its office in Seoul, South Korea

In a statement following Tuesday’s filing, Samsung said: ‘The company will incorporate more value-added features into panels and reinforce its competencies in new applications such as foldable displays’.

This could refer to its ‘foldable’ handheld device rumoured for launch in 2019, or the prototype bendable displays, branded Youm, it first showed off in 2013.

Last week, Samsung confirmed that it was developing an ‘unbreakable’ smartphone display that could withstand multiple drops.

The next-generation organic LED display features a ‘fortified plastic’ that means users can theoretically drop, throw or bend their phone without worrying about cracks, the technology company claimed.

Samsung said it was tested by Underwriters Laboratories (UL), which conducts safety tests for the US Department of Labor.

This involved dropping the display 26 times in a row from a height of four feet, as well as temperature tests that included a 71-degree environment and an environment that was -32 degrees.

‘The Samsung unbreakable panel continued to function normally with no damage to its front, sides or edges,’ it confirmed in a statement.

Following its first-half profits filing on Tuesday, Samsung warned of stiffer competition in the second half due to the release of new models. 

The South Korean tech giant said demand for memory chips, its biggest earnings contributor by far, would remain strong in the second half thanks to the growth of server data centers. 

Revenue for the April-June period fell 4 per cent to £39.8 billion ($52.3 billion), broadly in line with Samsung’s earlier estimate.

Like other big electronics firms, Samsung faces challenges from the US-China trade war, falling prices of some memory chips and the rise of cheap Chinese-made handsets.

The firm said it expected sales of flexible OLED screen technology to rebound in the second half. This could refer to its 'foldable' handheld device rumoured for launch in 2019 (artist's impression)

The firm said it expected sales of flexible OLED screen technology to rebound in the second half. This could refer to its 'foldable' handheld device rumoured for launch in 2019 (artist's impression)

The firm said it expected sales of flexible OLED screen technology to rebound in the second half. This could refer to its ‘foldable’ handheld device rumoured for launch in 2019 (artist’s impression)

Samsung’s difficulties in the mobile market, which accounts for about 40 per cent of its revenue, have been exacerbated by its recent lack of innovation to drive sales of its premium Galaxy series gadgets.

The mobile business booked £1.8 billion ($2.4 billion) in quarterly operating profit.

Data released by market tracker Counterpoint Research in July showed Samsung’s latest Galaxy 9 Plus premium handset had been overtaken by Apple’s iPhone 8 as the world’s top-selling smartphone.

WHAT IS SAMSUNG’S ‘GALAXY X’ FOLDING SMARTPHONE?

Samsung is rumoured to be developing a phone with a bending display. 

The radical gadget, expected to be called the Galaxy X, will have a 7.3-inch flexible OLED screen which folds inwards like a book.

When folded, it will work as a phone, and can be unfolded to operate as a tablet. 

According to Korean site  ETNews, Samsung will develop the foldable displays by March, manufacture panels in September and start manufacturing the phone itself in November.

This would mean the handset could go on sale in early 2019.

Samsung is yet to make any official announcements about the folding device.

Patents for the device show a book-like handset that can be opened to transform into a tablet

Patents for the device show a book-like handset that can be opened to transform into a tablet

Samsung’s Galaxy X will have a 7.3-inch flexible OLED screen which folds inwards like a book. When folded, it will work as a phone, and can be unfolded to operate as a tablet. Pictured is a Samsung patent showing how the device will work

Competition from cheaper Chinese brands like Xiaomi Corp and Huawei have already seen Samsung lose market share in China and India, the world’s top smartphone markets.

Samsung regained its lead in India’s smartphone market in the second quarter thanks to solid sales in its budget segment according to Counterpoint Research.

While the mobile business struggles, the chip business remained Samsung’s top earner in the second quarter as sales to the cloud-computing and crypto-currency industries propped up DRAM chip prices even as NAND flash memory prices slipped.

Samsung’s chip unit posted a record 11.6 trillion won operating profit, up 45 per cent from a year ago.

Samsung shares were down 0.5 per cent in early trading, compared with 0.2 per cent drop in the broader market. 

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