Samsung’s mobile sales tumble in fourth quarter as it battles Apple’s iPhone 12

Samsung took advantage in the fourth quarter of strong demand for technologies that help people during the pandemic – such as TVs – but its mobile business could not fully compete with Apple’s new ones. iPhone 12 Series.

The South Korean giant said on Wednesday that its overall revenue in the fourth quarter had risen by 2.8% from the previous year, but its sales for mobile business had fallen by 11%. The results are in contrast to Samsung’s main competitor, Apple. The iPhone giant earlier Wednesday reported its highest income ever as it benefited from rising demand for its new iPhones. Apple’s mobile business revenue increased by about 17% from the previous year.

Samsung said that its revenue from mobile devices fell due to intensified competition in the year-end season, and that its mobile profits suffered from higher marketing costs. Its display industry has meanwhile achieved its highest earnings ever as Samsung sold more panels for smartphones and more expensive TVs.

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] flagship range by expanding S21 sales and popularizing the foldable category, “which probably includes lower prices for its Galaxy Z Flip and Z Fold devices. Samsung said it will also increase smartphone sales by fully addressing the demand for replacing 5G with 5G models in the big market.

“By 2021, market demand is likely to recover to pre-COVID levels, backed by gradual recovery in the economy and the rapid expansion of the 5G market,” Samsung said in a press release. However, it warned that “there is uncertainty 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 buy fewer memory chips. It also said that tougher competition with smartphones would hurt its results. Apple in particular was a tough competitor for Samsung at the end of 2020. Apple introduced four new iPhones in the quarter, all of which came with 5G connectivity.

Like its competition, Samsung is grappling with the coronavirus pandemic and the impact it has on consumers. When COVID-19 first 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 eventually recovered when new 5G phones hit the market, but not soon enough to boost Samsung’s Galaxy S20 sales.

Pandemic question

Computers and TVs were popular items with people sitting at home, and appliances are the purchase that consumers can put off for just as long. Samsung has benefited from the rising demand for all these products, as well as for its components that provide memory storage for data centers and consumer devices. In October, Samsung reported its highest quarterly revenue ever, thanks to a significant increase in consumer demand for smartphones, computers and other products.

Apple’s entry into the 5G phone market with its full iPhone 12 series in October probably hurt Samsung in the last quarter of the year. By the end of 2020, Samsung introduced about 20 5G phones, but there were still no compelling reasons for consumers to need them. People are holding devices longer than before, and early 5G devices were expensive. Apple has brought 5G to all phones in its iPhone 12 series without increasing the price of its Pro models. And it has even introduced a cheaper iPhone 12 Mini to people who are more price conscious.

Apple said on Wednesday that its iPhone business generated $ 65.6 billion in sales, more than 17% more than the $ 56 billion reported last year. And this despite the fact that some iPhone models can still be hard to find since it came on the market in October. Each of Apple’s other businesses has also grown at double-digit rates, and this has shown how people have been turning to their entertainment, health and education-oriented products throughout the year.

The pandemic forced Samsung to change strategy for some of its mobile products, including the launch of a cheaper model of the Galaxy S20, called the S20 FE. And it held its Galaxy 21 launch in mid-January, about a month earlier than usual. The most striking difference from last year’s Galaxy S20 series is the lower price, with each model for $ 200 less than its predecessor. The company hopes the lower price will help attract buyers who have delayed upgrading their devices.

Samsung’s fourth-quarter results will not benefit from the devices that hit stores on Friday.

For the fourth quarter, Samsung said its operating profit rose 26% to 9.05 billion Korean won ($ 8.2 billion) as the company benefited from demand for its exhibits and memory chips. And it reported revenue of 62.55 trillion Korean won ($ 56.4 billion), up slightly from 59.88 trillion Korean won a year ago.

Samsung said in early January it expects 9 billion Korean operating profit won in fourth quarter ($ 8.2 billion), up from 7.16 billion Korean won ($ 6.5 billion) a year ago, but below the third-quarter level of 12.4 billion won. The fourth-quarter poll was about half a billion won lower than analysts had expected, according to a Bloomberg poll. Samsung said at the time that its sales would rise to 61 billion Korean won ($ 55.8 billion) from 59.9 billion Korean won ($ 54.7 billion) in the fourth quarter of 2019.