Samsung records $10.9bn profit in Q2, 2021 despite 22.4% decline in smartphone sales

Global electronics giant, Samsung has recorded $10.9 billion in profits in Q1, 2021 which ended June 30. This represents a 53% increase from the $9.6 billion that market experts had predicted.

This impressive figure was due to increased server demand in memory prices and shipments as well as the resumption of activities in its foundry business in Austin, Texas. The company, however, recorded lower smartphone sales according to preliminary results.

The South Korean conglomerate also attributed these earnings to a one-time compensation from OLED display units supplied to Apple. According to analysts, Apple ordered fewer components than was agreed in a preexisting contract. Apple thus had to pay $879 million compensation for the infraction.

According to IBK Securities analyst, Kim Woon-Ho, “the total number of iPhone sales didn’t meet contract requirement of OLED panels partly because iPhone mini sales were lower than expected, usually, the reimbursement is around 1trillion won ($879 million).”

This is Samsung’s biggest second-quarter profit since 2018.

Smartphone shipment falls by 22.4%

When Samsung launched a range of Galaxy phones in March 2021, it must have expected them to boost its smartphone shipment. Unfortunately, that wasn’t the case as its total shipment for the quarter fell to 59 million from 76 million in Q1.

This represents an astounding 22.4% decrease.

The reason for this decline was due to a decline in sales of the flagship phones launched earlier in the year. The world’s largest smartphone maker suffered severe supply disruptions in Vietnam. Demand also fell in India due to restrictions imposed in the country as new Covid-19 cases soar.

India is the second-largest smartphone market in the world behind China. Therefore, a crash in demand would lead to a general decline in smartphone shipments. However, India isn’t Samsung’s biggest market. According to Sammobile, Samsung’s biggest markets are in China and North America. With these markets already opening up, one would expect its shipment numbers to look better.

See also: Samsung Unveils Galaxy A52, A52-5G and A72 among other Interesting Updates at its Unpacked Event

Analysts, however, insist the decline was expected. According to Lee Seung-woo, an analyst at Eugene Investment & Securities analyst, “We expect Q2 smartphone shipments fall to 59 million units from 79 million units in Q1.”

Samsung gearing for a more profitable third-quarter

Despite reduced sales in smartphones, the company continues to benefit from online activities that have boosted demand for its memory chips for PCs and computers. Data centers are increasing demands too in order to expand their capacity as well as protect against a shortage of chips.

Samsung is gearing for an even more profitable second quarter as it invests in a major technology transition to a next generation of memory chips in the later half of the year. The DDR5 (Double Data Rate 5) modules promise to be twice as fast and more power-efficient than the current DDR4 modules.

The company says the DDR5 modules will cost significantly more and will be available in limited quantities for a start. It hopes to benefit from the pricing strength of these new memory chips in order to recoup losses incurred by the shutdown of its foundry in Austin.