Samsung’s Galaxy S9 and S9+ just didn’t do it for smartphone customers, selling fewer units than the South Korean smartphone giant forecast and slowing its profit growth, the company reported late Monday.
The summer is always a bit quiet for smartphone makers as they prepare to launch new phones for the fall. But sales for Samsung were down even for the traditionally low-key quarter, as its flagship phones struggled to outshine the iPhone X and iPhone 8. Samsung’s mobile communications vice president, Lee Kyeong-Tae, acknowledged in an earnings call that sales of its flagship Galaxy S9 and S9+ had been “weaker than expected,” as his unit reported a 22 percent drop in sales revenue to $20.2 billion.
He pointed to a couple of reasons for the results. People are holding on to their high-end smartphones for longer periods of time between upgrades, Lee said, meaning fewer people are rushing out to buy flashy new models each year. Samsung globally is also facing competition on its less expensive phones from Chinese smartphone makers such as Huawei and Xiaomi.
Samsung’s mobile business accounts for nearly 40 percent of the company’s sales. To offset slowdowns in mobile, the company has touted its growing sales of chips, which it manufacturers for itself and other smartphone makers, including Apple. Semiconductors were its strongest category in terms of growth, up 25 percent from the same time last year.
Overall, the company reported $13.3 billion in profit, up 6 percent from the same time last year, on $52.1 billion in revenue. It was Samsung’s slowest profit growth for the company in more than a year.
The smartphone market overall has been down this year, with shipments slipping 2.9 percent in the first quarter of 2018 from the same period last year, according to market intelligence firm IDC. Samsung, while still the world’s largest smartphone maker, saw its shipments down 2.4 percent in the first quarter, IDC reported in May.
“Looking forward, more affordable premium devices might be the solution the market needs in the second half of the year to drive shipments back in a positive direction,” IDC research manager Anthony Scarsella said at the time.
Samsung appears to be taking that idea to heart. During the call with investors, executives promised that the Note 9, a new addition to Samsung’s large-screened phone line, “offers exceptional performance for a reasonable price.” It will also debut a few weeks earlier than usual — a New York launch event is planned for Aug. 9 — which Robert Yi, executive vice president for investor relations, said was part of a strategy to “address rising competition.”
The company also promised to come back in the next smartphone generation with something more exciting.
“We expect 5G and new form factors to bring new energy to the market. We will be preparing easily to tap this breakthrough technology,” Lee told analysts during the earnings call.
The reference to “form factors” could be an allusion to Samsung’s work on flexible screens, which it first teased at the CES technology show in 2013. That work has fueled rumors of a foldable smartphone from Samsung for years. With the 10th model of the Galaxy S series coming up, many analysts say we may see the company’s first attempt at a foldable phone to make the milestone.