Samsung Posts Record 25% Revenue Increase in Q3 2020

Global smartphone manufacturer, Samsung has recorded its highest ever quarterly revenue following a significant boost in consumer demand for smartphones and electronics in Q3 2020.

According to the latest Q3 report, the company realised record revenues of KRW 66.96 trillion ($59 billion) – an 8% increase from KRW 62 trillion ($55 billion) year-on-year and 25% higher than the KRW 52.97 trillion ($47 billion) posted in Q2 2020.

Samsung bounced back strongly after seeing a 27% decline in sales year-on-year for Q2 2020 due to economic downturn brought about by global COVID-19 restrictions.

The company’s Q3 2020 revenue of $59 billion eclipsed the previous all-time high of KRW 65.46 trillion ($58 billion) recorded in the third quarter of 2018.

For the third quarter ended September 30, Samsung reported a 59% surge in operating profits year-on-year from KRW 7.78 trillion ($6.7 billion) to KRW 12.35 trillion ($10.9 billion). The third-quarter operating profit was a 52% increase from KRW 8.15 trillion ($7.2 billion) realised in Q2 2020.

Strong Smartphone Sales Drive Record Revenues

Samsung attributed its strong third quarter performance to a sharp rise in smartphone sales after lockdown restrictions were eased in key markets including India. Smartphone sales increased by almost 50% from the previous quarter.

Smartphone sales in Q3 2020 generated KRW 30.49 trillion ($27 billion) in consolidated revenue, accounting for 46% of total revenue. Also, mobile sales yielded KRW 4.45 trillion ($39 billion) in operating profits – 41% of total profits realised.

Samsung reported a massive increase in overall market demand for its mobile devices which fuelled a sales boom in leading economies such as India post-lockdown.

The re-opening of the World’s fifth-largest economy, India, has been crucial to Samsung’s strong rebound with the company today overtaking Xiaomi to lead India’s smartphone market.

Samsung ended Xiaomi’s three-year spell at the top in the country where it now possesses a smartphone market share of 24% compared to Xiaomi’s 23%. According to Counterpoint, Samsung exceeded pre-COVID-19 level shipments in the third quarter by 32% year-on-year.

Numerous new launches including the Galaxy Note20 and Galaxy Z Fold2 incentivised customers during the third quarter to boost sales.

Reduced Operating Costs Fuel Recovery

Samsung noted that effective cost management was central to its upturn in profits for the third quarter. The company’s capital expenditures in the third quarter amounted to KRW 8.4 trillion ($7.4 billion) – including KRW 6.6 trillion ($5.8 billion) spent on semiconductors and KRW 1.5 trillion ($1.3 billion) on displays.

Although Samsung expended 86% more than the KRW 0.8 trillion ($0.7 billion) spent on displays in Q2, the company spent 24% less than the KRW 8.6 trillion ($7.6 billion) spent on semiconductors in the previous quarter.

For Q3 2020, the company’s $7.4 billion total expenses meant a 15% reduction from its capital expenditure of KRW 9.8 trillion ($8.7 billion) in the second quarter.

Cumulatively, the smartphone makers’ expenditure for the third quarter decreased by KRW 1.5 trillion ($1.3 billion) compared to that of Q2 2020. Samsung disclosed that this was achieved through component standardization and a reduction in marketing costs, leading to more than 50% increase in profitability.

In summary, the upsurge in Samsung’s consolidated revenue and profit for the third quarter may not be replicated in the fourth quarter results due to higher marketing costs, intensified competition and the absence of new smartphone launches.