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Samsung’s profits are up – but it might not be good news for the S20

Samsung announced its Q1 earnings this week and, on the surface, it seems the recent Covid-19 outbreak has not fazed the South Korean giant.

The company disclosed consolidated sales of approximately 55 trillion won and a consolidated operating profit of approximately 6.4 trillion won. That’s a slight year-on-year increase on Samsung’s Q1 sales and profit in 2019, with a 5% boost in sales.

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Samsung has yet to break down its earnings into specific services or to expand on the company’s performance in the first quarter, so Trusted Reviews reached out to analysts to learn more about what these figures could mean.

“Samsung’s Q1 2020 guidance highlights that the firm may be back on the path of growth, following a difficult 12 months between Q4 2018 and Q4 2019, where the company saw four successful quarters of total revenue decline”, said Futuresource consulting market analyst, James Manning Smith.

While sales might be looking up for Samsung for the first time in over a year, the performance of its Galaxy phones could tell a different story.

“Samsung’s revenue growth, amid the pandemic, doesn’t necessarily give assurances regarding the performance of its smartphone division”, said IDC Research analyst, Raquel Marques.

“With Covid-19 forcing companies across the globe to speed up their digitalization, components for data centres saw an increase in demand during the quarter, which might have overturned the less stellar performance of the mobile division”.

It isn’t a surprise that flagship smartphones have been underselling. The coronavirus has had a negative impact on both supply and demand for many companies worldwide.

“The demand is impacted very negatively in North America, in Western Europe, so some of the critical markets where, for example, Samsung could have pushed the flagship S20, it’s not gonna happen”, said Gartner senior director analyst, Roberta Cozza.

While the virus won’t stop people from spending cash on electronics, it might prompt them to think twice about an unnecessary phone upgrade.

“If there is spending, it is on services making the smartphone experience better. So more content, maybe a subscription to a content service or better connectivity within the household”, said Cozza.

“Maybe an additional tablet for remote learning or media consumption – an additional low-cost tablet – but not a new flashy smartphone, because the situation was already hard, difficult before”.

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The stats also bring bad news for Samsung’s foldable endeavours, according to the analysts.

“[Samsung’s] latest foray into the hyper-premium segment of foldable handsets is unlikely to have been a driving force in its latest revenue guidance”, said Manning Smith.

“Its range of foldable phones have been dogged by issues in terms of durability, turning consumers off from investing in the pricey smartphones. The fold accounted for less than 0.5% of Samsung’s shipments in 2019, and despite the release of the Z Flip, Samsung have not managed to increase that even to 1% of its Q1 handset sales”.

“They’re just trying different form factors but the prices are so high so I think that that development will be postponed in 2021”, added Cozza.

“[Samsung] will need to think about their product portfolio and they would actually maybe try to make, for example, more affordable 5G units, shift the product mix to good value for money and maybe the mid-tier of the smartphone market. Definitely, for the moment, put foldable aside because simply I don’t think there has been huge demand anyway”.

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