Samsung unveiled its new Galaxy S21 line before normal.
Sarah Tew / CNET
Samsung benefited in the fourth quarter from strong demand for technologies that help people during the pandemic – such as TVs – but its mobile business has failed to compete with new ones list of iPhone 12.
The South Korean giant said on Wednesday that its fourth quarter overall revenue increased 2.8% over the previous year, but sales for its mobile businesses fell 11%. The results contrast with Samsung’s main rival, Apple. The iPhone giant the previous Wednesday reported its highest revenue as it benefited from increased demand for your new iPhones. Apple’s mobile business revenue increased about 17% over the previous year.
Samsung said its mobile revenue has declined because of “intensified competition at the end of the year”, and its mobile profits have suffered from higher marketing costs. Meanwhile, its display business saw its biggest gains, as Samsung sold more panels for smartphones and more expensive TVs.
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Going forward, Samsung expects its Galaxy S21 lineup, which it introduced this month at a $200 lower starting price than the Galaxy S20, to boost its results in the first quarter. And the “upcoming release of new mass-market products will also contribute to the growth in the first quarter.” Still, its companywide profit in the first quarter likely will be lower as a stronger Korean won hurts its memory chip business. Samsung also expects to be hurt by costs associated with new production lines for its processors, despite “solid” demand for memory chips in mobile devices and data centers.
For the full year, Samsung expects its mobile business to benefit from its efforts to “strengthen leadership in [its] main line expanding sales of the S21 and popularizing the folding category “, which probably includes reducing the prices of your Galaxy Z Flip and Z Fold devices. Samsung said it would also “increase smartphone sales by fully meeting the demand to replace 5G with mass-market 5G models.”
“In 2021, market demand is likely to recover to pre-COVID levels supported by a gradual recovery in the economy and the accelerated expansion of the 5G market,” Samsung said in a press release. Even so, he warned that “uncertainties persist about the possibility of recurring COVID-19 waves”.
In October, Samsung warned that the fourth quarter would be weaker than the third, as server customers bought less memory chips. He also said that tougher smartphone competition would hurt his results. Apple, in particular, was a tough rival for Samsung in late 2020. Apple launched four new iPhones in the quarter, all with 5G connectivity.
Like its competition, Samsung is battling the coronavirus pandemic and the impact it is having on consumers. When COVID-19 began to spread, concerns about the disease caused a dramatic slowdown in phone purchases, as people around the world decided that the device they had was good enough. Demand finally recovered when new 5G phones started to hit the market, but not enough to boost sales of the Samsung Galaxy S20.
Pandemic demand
Computers and TVs have been hot items with people trapped at home, and home appliances are purchases that consumers can only postpone for some time. Samsung has benefited from increased demand for all of these products, as well as its components that provide memory storage for data centers and consumer devices. In October, Samsung recorded its highest quarterly revenue, thanks to the “significant increase in consumer demand” for its smartphones, computers and other products.
Apple’s entry into the 5G phone market with its full iPhone 12 lineup in October likely hit Samsung in the last quarter of the year. By the end of 2020, Samsung had launched around 20 5G phones, but there was no compelling reason why consumers would need them. People have been holding the devices for longer than before, and the first 5G devices have been expensive. Apple brought 5G to all phones in its iPhone 12 line without increasing the price of its Pro models. And it also introduced a cheaper iPhone 12 Mini for people who are more concerned with price.
On Wednesday, Apple said its iPhone business generated $ 65.6 billion in sales, an increase of more than 17% over the $ 56 billion reported last year. This is despite the fact that some iPhone models are still hard to find since they hit the market in October. Each of Apple’s other businesses also grew at double-digit rates, showing how people turned to their products focused on entertainment, health and education throughout the year as they adapted to life in the pandemic.
The pandemic, however, has forced Samsung to change its strategy for some of its mobile products, including the introduction of a cheaper model of the Galaxy S20, called the S20 FE. And it launched the Galaxy 21 in mid-January, about a month earlier than usual. The most noticeable difference from last year’s Galaxy S20 line is the lower price, with each model selling for $ 200 less than its predecessor. The company hopes that the lower price will help attract buyers who have delayed updating their devices.
Samsung’s fourth-quarter results will not benefit from these devices, which hit stores on Friday.
For the fourth quarter, Samsung said its operating profit increased 26% to 9.05 trillion Korean won ($ 8.2 billion), as the company benefited from demand for its monitors and memory chips. And it recorded revenue of 62.55 trillion Korean won ($ 56.4 billion), slightly up from the 59.88 trillion Korean won a year ago.
Samsung in early January said she expected to post a fourth quarter operating profit of 9 trillion Korean won (US $ 8.2 billion), up from 7.16 trillion Korean won (US $ 6.5 billion) a year ago, but below the third quarter level of 12.4 trillion won. The value of the fourth quarter was about half a trillion won, lower than expected by analysts, according to a Bloomberg survey. At the time, Samsung said its sales would rise to 61 trillion Korean won ($ 55.8 billion), compared to 59.9 trillion Korean won ($ 54.7 billion) in the fourth quarter of 2019.