On October 7, Samsung offered guidance it would generate $6.43 billion in operating income against $52 billion in revenue in Q3 2019. However, on Wednesday, the firm revealed it had outperformed its third-quarter financial projections. Indeed, the South Korean corporation recorded earning $6.7 billion in operating profit against $53 billion in revenue.
Moreover, though the firm predicts a “sluggish” fourth-quarter, it also expects to see growth in its semiconductor segment in 2020.
Bad, But Better Than Expected
To be clear, Samsung did not have what can be described as a good third quarter. The firm’s revenue fell 5.2 percent year-on-year, and its operating profit declined by a staggering 56 percent. Moreover, the corporation has now posted four consecutive quarters of falling operating income.
Notably, the conglomerate’s financial performance hasn’t suffered because its consumer electronics business has faltered. Indeed, that segment of the firm’s business actually increased by 7.36 percent from the same period last year. The company disclosed it experienced a double-digit uptick in sales of its flagship Galaxy Note 10 handset in Q3 2019.
Samsung’s smartphone division also experienced an increase in profitability thanks to the release and continued growth of its Galaxy A budget handset line.
The firm’s now year-long income decline is due to the collapse of its semiconductor business. Samsung primarily manufactures NAND and DRAM for smartphones, and the combination of a weak handset market and global component glut severely undercut that part of its business. Indeed, the firm’s chipset income fell by 77 percent from Q3 2018.
However, Samsung improved its overall operating profits by 18 percent from the last quarter, which follows a 5.93 percent increase from Q1 to Q2. Though gradual, the electronics maker is on the path to recovery.
Unfortunately, the South Korean conglomerate is expecting a profitability road bump in Q4 2019. The corporation offered guidance noting “sluggish” demand for its memory chips next quarter. Besides, the firm intends to increase its marketing spending to give its handsets a holiday season push.
Furthermore, the corporation predicted weak mobile display sales due to the underperformance of certain premium handsets. Oddly, Apple reportedly asked its suppliers to increase production of its iPhone 11 series to meet demand, and Samsung makes the iPhone’s OLED screens.
Nevertheless, the company expects its semiconductor business to experience a resurgence next year. The firm acknowledged lingering global macroeconomic uncertainties might still negatively affect the memory chip market in 2020. But it forecasts revenue growth due to rising demand. Specifically, Samsung asserts the deployment of fifth-generation data networking technology will drive consumer electronics spending.
Like the rest of the semiconductor industry, the device maker anticipates 5G will be the tide that lifts all ships.