Samsung's Q4 profit tumbles as Apple takes the lead in smartphones

The South Korean company has been hurt by falling chip prices -- but its mobile business posted stronger results.

Shara Tibken Former managing editor
Shara Tibken was a managing editor at CNET News, overseeing a team covering tech policy, EU tech, mobile and the digital divide. She previously covered mobile as a senior reporter at CNET and also wrote for Dow Jones Newswires and The Wall Street Journal. Shara is a native Midwesterner who still prefers "pop" over "soda."
Shara Tibken
3 min read
Samsung Galaxy Note 10 Plus

Samsung's Galaxy Note 10 Plus wasn't enough to boost its fourth-quarter sales.

Angela Lang/CNET

Samsung on Wednesday reported the end to a rough year -- a day after its chief rival Apple posted an all-time high in revenue and earnings and reclaimed its title as the world's biggest smartphone maker.

Samsung said its fourth-quarter operating profit tumbled by 34% to 7.16 trillion won ($6 billion). Its overall revenue edged up 1% to 59.88 trillion won ($50.6 billion). Last year marked its worst performance since 2015, as noted by Reuters, with its operating profit falling by 52%. Apple on Tuesday reported its revenue for the December period climbed 8.9% to $91.82 billion, while its earnings also rose.

The results show the contrast between the fortunes of the two companies, largely due to the different businesses where they're making bets. Samsung is best known as a phone and TV maker, but it also sells more memory chips than any other company on the planet. Apple, meanwhile, still makes the majority of its revenue from its iPhone , but it's had success expanding into new areas like services and wearables.

Watch this: Details about Samsung's next foldable phone pop up everywhere

While Samsung saw "solid sales of flagship smartphones ," its components business -- 41% of its revenue last year -- has been hurt by falling memory chip prices and weak demand for display panels. Apple, on the other hand, benefited in the quarter from strong demand for its latest iPhone 11 handsets, AirPods Pro wireless earbuds and services like its App Store.

"Apple is recovering, due to cheaper iPhone 11 pricing and healthier demand in Asia and North America," Strategy Analytics analyst Neil Mawston said. His firm said Apple became the world's top smartphone vender in the December quarter, shipping an estimated 70.7 million handsets versus Samsung's 68.8 million. Apple no longer details unit sales, but it said overall iPhone revenue climbed 7.6% to $55.96 billion.

Samsung, meanwhile, also saw a boost in its mobile business, but it wasn't enough to offset its weaker components operations. The company's mobile business operating profit soared 67% to 2.52 trillion won ($2.13 billion), while its revenue increased 7% to 24.95 trillion won ($21.1 billion). Its device solutions business -- which includes displays and semiconductors -- saw its operating profit tumble 57% while its revenue slid 11%.

"Fourth-quarter profit dropped from a year earlier due to the continued fall in memory chip prices and weakness in display panels," Samsung said in a press release. But it noted that "quarterly earnings improved significantly for the mobile business in annual terms, thanks to solid sales of flagship Galaxy smartphones and lineup changes to improve profitability for mass-market models."

Betting on 5G and foldables

Samsung's hoping for a turnaround in 2020 but noted that it "sees continued uncertainties in the global business environment."

When it comes to the mobile business, Samsung expects demand to be weak for smartphones and tablets in the first quarter because of seasonality. It also expects its profits to be flat because of the higher amount of money it will spend on marketing its upcoming smartphones. Still, it expects its revenue to rise because of "the launch of new flagship models and foldable smartphones."

Samsung on Feb. 11 will hold an Unpacked event in San Francisco. It's expected to introduce its newest flagship smartphone, likely called the Galaxy S20, as well as show off a new foldable that resembles Motorola's new Razr foldable.

Overall for 2020, Samsung said its mobile business will try to improve its profits by expanding sales of its premium phones, including its new foldable devices and more 5G phones. It expects competition to intensify as more companies introduce high-end components in their devices, including more cameras. Samsung hopes to differentiate by expanding 5G adoption and introducing new designs for foldables.

"Furthermore, Samsung will expand its 5G product portfolio and strengthen product competitiveness of mass-market smartphones by quickly adopting innovative technology based on market needs," Samsung said.

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