On April 5, Samsung released crushingly low estimates for its Q1 2019 revenue and operating profit. The South Korean electronics firm expects revenues of 52 trillion won ($45.7 billion) and 6.2 trillion won ($5.5 billion). As such, the company’s income and profit have plunged by 60 and 14 percent respectively from Q1 2018.
If Samsung’s projections are confirmed, its profits for the first three months of this year represent its weakest quarterly financial performance since 2016. Notably, the corporation’s profit margins underperformed back then due to the Galaxy Note 7 recall.
When 10 Million Units Sold in a Month Isn’t Enough
To its credit, the electronics giant prepared investors for a soft 2019 earlier this year when it released its Q4 2018 results. Last quarter, Samsung posted a disappointing 10 and 29 percent in revenue and operating profit. The firm explained the global downturn in smartphone sales took a huge bite out of its formally robust income.
However, the corporation also provided guidance that its Galaxy S10, released early March, would buoy its sales. Sadly, Samsung’s forecast proved to be incorrect despite it selling an estimated 10 million units in its first month of release.
The Contradiction of Making Products Too Good
The corporation’s flat smartphone sales are not the only major challenge it faces this year. Industry analysts expect Samsung to announce a steep drop in its semiconductor sales for Q1 2019. Ironically, the firm’s losses aren’t due to it being outpaced by a rival, it’s because its chipsets are too good.
The South Korean conglomerate has spent the last few years dominating the field by selling high-capacity, high-performance microchips to the mobile electronics sector. Consequently, the current generation of online-enabled hardware has proven to be highly resilient. Since Samsung sells most of its chipsets to mobile phone manufacturers, it was outsold by the more multifaceted Intel in Q4 2018.
With its most profitable segments flatlining, the electronics maker is apparently pinning all of its hopes on 5G catching on. Admittedly, that strategy has proven successful for other mobility companies in the past. Notably, HTC enjoyed record-setting sales earlier this decade because it was the first smartphone company to release a killer 4G device.
However, tech brands shouldn’t trust their future success to a once a decade trend. Notably, since HTC failed to diversify its business, it hasn’t made a profit since 2016. Ideally, Samsung will learn from its competitor’s missteps and expand into some new markets. Perhaps the corporation can find success by launching a subscription video on demand service.