Why Samsung’s Growth Slowed Down In Q2

by Trefis Team
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SSNLF
Samsung Electronics
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Samsung Electronics (OTC:SSNLF) recently published its earnings guidance for Q2 2018, indicating that its growth is likely to slow down after posting a string of record profits over the last few quarters.  The company expects its Q2 operating profits to grow by 5% year-over-year to 14.8 trillion won ($13.2 billion), with revenues likely to decline by about 5% to 58 trillion won ($52 billion). While the company is expected to break out its detailed performance when it publishes its final results later this month, we believe that lukewarm sales of the company’s latest flagship Galaxy S9 and potentially slower growth in the memory business likely impacted its performance.

We have created an interactive dashboard analysis, which outlines how Samsung’s key segments are likely to perform this year. You can modify these drivers to arrive at your own price estimate for Samsung.

Slower Growth For Memory Business

Samsung’s Memory business likely had a mixed quarter after posting multiple quarters of stellar growth. Meanwhile, its DRAM business likely remained strong, driven by favorable pricing and the company’s focus on higher-value products, such as high-density server DRAM, although there is a possibility that the market could see declines from next year onwards due to higher supply. The performance of Samsung’s NAND business is likely to have been less impressive, as prices began falling late last year as more 3D NAND capacity came online. Samsung’s display business may also be seeing some headwinds, as key customer Apple – which began procuring OLED panels for its flagship iPhone X device – is expected to use cheaper LCD screens on some of its new devices which launch this fall.

Smartphone Headwinds As S9 Sees Lukewarm Response

Samsung’s latest flagship smartphone, the Galaxy S9, which was launched in late March, is reportedly seeing sluggish sales as it is perceived as being very similar to the company’s last generation flagship, the Galaxy S8. The company is also likely to see its smartphone-related marketing costs rise over the quarter, owing to promotions of the new device. Additionally, Samsung’s mid-range handsets are also facing mounting pressure in growth markets such as India, where Chinese smartphone brand Xiaomi has overtaken it  in terms of market share.

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