Mobile

Samsung gets boost from Galaxy S21 in first quarter

The electronics giant reports 45% increase in operating profit, thanks to a rebound in its mobile unit.

Samsung has been counting on its new, inexpensive Galaxy A series devices to attract new smartphone buyers.
Samsung

Samsung benefited from a rebound in its mobile unit and continued demand for home appliances during the pandemic, offsetting lower earnings in its semiconductor business.

The Korean electronics giant said Wednesday its overall operating profit for the three-month period ended March 31 climbed 45% to 9.38 trillion won ($8.45 billion). Sales in its mobile business increased 13% year over year to 28.2 trillion won after reporting a downturn in that unit in the fourth quarter of 11%.

The company credited sales of its flagship Galaxy S21 with boosting the unit's performance, but it said it expects revenue and profit to decline due to a drop in smartphone sales and shortage of some components. Samsung's results came the same day that Apple, its chief rival, reported sales of iPhones jumped 65% during the quarter.

Samsung also reported record first-quarter revenue of 65.4 trillion won, an increase of 18% over last year's quarter.

The company's consumer electronics division, which is responsible for TV sales, saw revenue increase 26% to 12.99 trillion won. TV sales were strong during the quarter, but Samsung reported said it expects weaker demand in the second half as the pandemic eases and people resume outdoor activities.

Samsung is best known as the world's biggest phone and TV maker, but it also sells more memory chips than any other company on the planet. However, while the division reported 19.01 trillion won in sales, an increase of 7%, its revenue declined 15% to 3.37 trillion won. The company expects strong demand for servers to boost the semiconductor market in the second half.

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When COVID-19 first started spreading a year ago, worries about the illness caused a dramatic slowdown in phone purchases as people around the globe decided the device they had was good enough. Demand eventually recovered as new 5G phones began to hit the market, and Samsung also benefited from consumers' need for products for working from home. 

But Samsung, other tech giants and even automakers now are grappling with component shortages that are limiting their ability to release products. Supply may not catch up to demand until late 2021, Qualcomm's incoming CEO told CNET last month. Samsung may be hurt by the inability to get components, but it's also a major display and processor supplier itself and could get a boost from higher prices for its products. 

To attract more price-conscious buyers, Samsung in January lowered the starting cost for its Galaxy S21 devices by $200 to $800 from last year's S20 family, partly because of lower component costs and partly as a recognition of the fact the world is battling a pandemic. The Galaxy A series, unveiled in March and rolled out in the US in April, takes Samsung's pricing even lower and gives the South Korean giant one of the cheapest 5G phones in the US with the $280 A32. 

Samsung's bigger push with the A series -- and its less expensive flagship models -- over the past two years reflects the reality we're all living in. Phone designs aren't changing much from year to year and consumers are holding onto devices for longer, about three years in the US versus two in the past. At the same time, Samsung has struggled to compete with Apple's newest 5G iPhones and the novel coronavirus pandemic has hurt millions of people financially. While high-end specs and cutting-edge features are nice for attention and buzz, people still care about what they're spending on phone, especially right now. 

In January, Samsung warned its companywide profit would be lower as a stronger Korean won hurt its memory chip business. Samsung at the time also expected 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. But it said its Galaxy S21 lineup and A series phone should boost its results. At the same time, Huawei, the world's top smartphone vendor for one quarter, has started to disappear from the mobile market because of a US ban. Samsung has seen an opportunity to woo Huawei's former customers. 

Along with attracting buyers to its new phones, Samsung has been benefiting from demand for its components, televisions, computers and other products necessary from working from home. The company unveiled its newest laptops on Wednesday, the Galaxy Book Pro and Galaxy Book Pro 360, both with 13-inch and 15-inch models. The 13-inch Galaxy Book Pro 360 contains 5G connectivity, and all are Wi-Fi 6E ready.

"There are a number of Samsung divisions that have done remarkably well, including its semiconductor and device panel businesses," CCS Insight analyst Fiona Vanier noted. "A big part of Samsung's strength has been the fact that it relies on multiple revenue streams. Currently, there is more demand for components like semiconductors, displays and memory, than manufacturers can manage to make -- a good place to be for Samsung."