Galaxy S9 and S8 help push Samsung to record Q1 profits

The Galaxy S9 duo helped propel Samsung Electronics to record operating profits for the first three months of this year. It took in an operating profit of $14.5 billion on $56.2 billion of revenue. That represents an operating margin of 25.8%, up 6.2 percentage points year over year.

The S9 didn’t do it alone, the older Galaxy S8 still sells well as do other premium models. Mobile accounts for $26.4 billion of the consolidated revenue, but only $3.5 billion of the profits. Samsung wants to keep this rolling by expanding its experience stores and offering more trade-in deals.

It’s Samsung’s semiconductor businesses that are raking in the profits to the tune of $10.7 billion.

The Memory business got a boost driven by increased demand for memory chips for servers and graphics cards. Samsung LSI and Foundry sold more mobile chipsets and chips for mining cryptocurrency.

The other vital component for phones – the screen – saw demand sag. Samsung Display took a hit due to increased competition in the LCD market as well as slower demand for flexible OLED panels (which have to compete with rigid OLEDs and LTPS LCD panels).

For the second quarter, Samsung expects to see the Memory to remain strong as demand for sever and mobile DRAM will be “robust”. The company believes it will see more orders for its flash memory chips as well. Despite increasing shipments of 10 nm chips, Samsung expects smartphone chipsets to take a hit while earnings from crypto chips will remain strong.

However, the big challenge will be the Display department. It will try to improve its margins by cutting costs and simultaneously improving yield. The average price of LCD panels has been declining too.

Samsung’s Mobile business is predicted to decline in Q2 as well due to “stagnant sales of flagship models” with weakening demand despite increased marketing expenses. Long term, Samsung is looking to AI and 5G to solidify its leadership. This includes expanding the Bixby 2.0 open ecosystem.

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