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opposing the planned merger of Samsung C&T and Cheil Industries

On July 7, Samsung Electronics released its tentative Q2 performance results, posting 48 trillion won in revenue and 6.9 trillion won in operating profit. Revenue was up 2.6% and operating profit 15.5% from Q1 as the company continued a gradual uptick in performance since Q3 of last year.

But with revenue still down 8.31% and operating profit 4.03% from the same quarter last year, the company has only managed a tepid recovery in performance, despite the launch of the Galaxy S6. Accounting for the strong US dollar, which has climbed from the 1,000 won to the 1,100 won range, Q2 revenue is down 13% quarter-on-quarter.

This showing at Samsung Electronics can largely be attributed to the fact that the Galaxy S6, which was released this past April, failed to meet expectations.

Investment analysts estimate the Q2 revenue of the company’s IT and Mobile Division, which is in charge of smartphones, to be 27.5 trillion (based on the market consensus). This is 21.4% less than the same quarter last year (35 trillion won), which was boosted by the launch of the Galaxy S5, the company‘s previous flagship smartphone.

With the Galaxy S6 receiving glowing reviews in the press immediately after its launch, there were projections that it would drive growth in revenue, but it failed to deliver. At one point, securities experts predicted that the company would sell 70 million units of the phone, but they later reduced this projection to the 40 million unit range.

Analysts also believe that the company’s mid-range smartphones - including the Galaxy A - did little to help increase its market share.

“Samsung has lost ground to the iPhone 6 in the premium market, and its share of the mid-range market also appears to be shrinking,” said Roh Geun-chang, head of the research center at HMC Investment Securities.

On the other hand, investment analysts think that the company’s Device Solutions division - which is in charge of semiconductors - repeated its strong performance in Q1 (3.39 trillion won in operating profit), backed by strong demand for DRAM (dynamic random-access memory) and NAND flash. The Display and the Consumer Electronics Divisions are also estimated to have posted 500 billion won and 250 billion won in operating profits, respectively.

“Until recently, the market was expecting a Q2 performance of 51.6 trillion won in revenue and 7.17 trillion won in operating profit, but revenue fell far short of that. Presumably this is because internal component revenue fell along with the slump in smartphone revenue as smartphone shipments failed to meet projections,” said Lee Ga-geun, an analyst at KB Investment and Securities.

“Declining demand in emerging markets and for TVs in Europe appears to be another major cause of the slump in revenue,” Lee said.

Before the launch of the Galaxy S6, Samsung Electronics and the Samsung group had stated at both public and closed-door events that they expected future performance at the company to form a clear V-shaped growth curve.

The company’s performance received even more scrutiny because, during the hospitalization of Chairman Lee Kun-hee, Samsung Electronics Vice President Lee Jae-yong had been deeply involved in major decisions, such as selecting a metal body for the Galaxy S6.

“In Q3, Samsung Electronics will maintain its Q2 performance, but in Q4, the performance will likely drop below Q2 because of the seasonal slump,” Roh said.

By Lee Jeong-hoon, staff reporter

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