Lahore – July 30, 2015 – Samsung Electronics Co., Ltd. today announced financial results for the second quarter ended June 30, 2015. Samsung’s revenue for the quarter was KRW 48.54 trillion, a three percent increase quarter-on-quarter (QOQ), while the operating profit for the quarter was KRW 6.9 trillion, an increase of KRW 900 billion QOQ. In the company’s earnings guidance disclosed on July 7, 2015, Samsung estimated second quarter consolidated revenues would reach approximately KRW 48 trillion with consolidated operating profit of approximately KRW 6.9 trillion.
The overall QOQ improvement in earnings was largely due to strong sales in the Semiconductor Business, led by memory products and mobile application processors, as well as the Consumer Electronics (CE) Division which benefited from the launch of new TV models. Despite the launch of Galaxy S6, improvement to earnings was quite marginal due to low smartphone shipments and an increase in marketing expenses for new product launches.
While 2H 2015 is expected to present mounting challenges, the company will try to improve earnings, as strong seasonality should drive growth in TV sales, while the 14-nanometer foundry business should also see sales growth. Meanwhile, despite risks posed by potential supply increase of LCD panels and premium DRAM products, the Memory Business and the Display Panel segment are expected to register solid earnings. While the IT & Mobile Communications (IM) Division is expected to face a difficult business environment, the sales momentum for high-end products will be maintained by adjusting the price of the Galaxy S6 and S6 edge and introducing new premium smartphone models. New middle- and low-end models will also be introduced, and the IM Division will continue to work on improving efficiency of expenditures.
Capital expenditure (CAPEX) for 2Q 2015 totaled KRW 5.9 trillion, including KRW 3.2 trillion for the Semiconductor Business and KRW 1.1 trillion for the Display Panel segment. Total CAPEX for 1H 2015 was KRW 13.2 trillion, which is approximately a 30 percent year-on-year (YOY) increase. A further increase in CAPEX for 2H 2015 remains under review, and CAPEX will be focused on securing platforms for future growth, such as V-NAND technology, and improving the manufacturing efficiency of display panels.
Semiconductor Sees Solid Growth
The Device Solutions (DS) Division posted KRW 17.87 trillion in consolidated revenue and KRW 3.87 trillion in operating profit for the quarter.
Despite low seasonality for the Memory Business, earnings remained steady due to an increase in high value-added products for mobile devices and servers, as well as an increase in the average density. Meanwhile, S.LSI revenue increased QOQ, due to increased sales of smartphone components driven by 14-nanometer mobile AP and steady demand for high-end LSI products, such as high-pixel CMOS Image Sensors and DDI for flexible display.
In 2H 2015, overall demand in the memory market is expected to be driven by broader SSD adoption for servers and PCs, as well as the launch of new smartphone models with higher memory density for enhanced specifications. The company will continue to secure profitability by accelerating 20-nanometer DRAM migration, expanding V-NAND supply and continuing 10-nanometer class NAND migration. Meanwhile, the System LSI Business’ revenue is expected to improve compared with 1H 2015, driven by an increase in 14-nanometer foundry revenue, the launch of new CMOS sensors and further entry into the Chinese mobile market. The System LSI Business will look to diversify its customer base and products to solidify its foundation for future growth.
Innovation to Drive Future Growth of Display Panel Segment
The Display Panel segment posted KRW 6.62 trillion in consolidated revenue and KRW 540 billion in operating profit for the quarter.
Although profitability of LCD panels improved due to increased sales of premium TV panels, such as those for UHD TVs, overall earnings for OLED panels decreased QOQ due to weak seasonality and increased expenditures from ramping up its new flexible display product line.
In 2H 2015, LCD market growth for UHD TV panels is expected to continue; however, risk factors exist including overall over-supply and decrease in demand from TV set makers. The company will look to achieve stable growth in OLED panels by reinforcing product line-ups for the middle- to low-end market, expanding customer base and addressing the demand for new high-end mobile devices. In particular, the Display Panel segment will reinforce the company’s leadership in the flexible display market. In the future, the company will develop new products, such as transparent and mirror displays, to secure new mid- to long-term growth engines. Despite downside risk in LCD panels during the third quarter, the Display Panel segment will strive to maintain profitability levels at par with the previous quarter by improving OLED panel sales.
New Mobile Devices to Improve Revenue
The IM Division posted KRW 26.06 trillion in consolidated revenue and KRW 2.76 trillion in operating profit for the quarter.
Overall revenue improved slightly QOQ for the Mobile Business, due to increased shipments of the Galaxy S6 and Galaxy S6 edge, despite a drop in overall smartphone shipments caused by declining shipments of older middle- to low-end models. Although revenue increased, profits increased marginally QOQ, due to supply difficulties from higher than expected market demand for the Galaxy S6 edge, as well as increased marketing expenditures that typically accompany flagship product launches.
Meanwhile, second quarter tablet shipments slightly decreased due to extended off-season in the market. The tablet market in 2H 2015 is expected to report negative growth YOY; however, the Mobile Business intends to actively respond to market demands with the Galaxy Tab A series and a new product scheduled for later this year.
In 2H 2015, the smartphone market is expected to grow YOY; however, the growth rate is expected to slow down. The Mobile Business plans to firmly maintain its sale of premium smartphones by flexibly adjusting the price of the Galaxy S6 and S6 edge, and launching a new model with a larger screen. Supply issues concerning the Galaxy S6 edge have been addressed. Moreover, the IM Division plans to enhance efficiency across the board, including product line-ups, marketing and R&D.
Premium Products Add to CE Division’s Growth
The CE Division, encompassing the Visual Display (VD), Digital Appliances (DA), Printing Solutions and Health and Medical Equipment (HME) Businesses, posted KRW 11.20 trillion in consolidated revenue and KRW 210 billion in operating profit for the quarter.
Despite a stagnant TV market, the VD Business saw improved performance QOQ due to the release of new models, such as the SUHD TV, as well as an expansion of premium products. Meanwhile, the DA Business saw improved performance compared to the previous quarter, thanks to sales of premium and innovative products, such as the Chef Collection refrigerators and Active Wash washing machines.
In 2H 2015, although market demand for TVs is expected to remain at the same level YOY, demand for UHD and large-screen TVs is expected to increase. As a result, the VD Business will expand premium model line-ups including SUHD and Curved TVs to mass market products in order to improve profitability. The DA Business plans to increase sale of premium products and actively improve revenue in developed markets, such as North America.
About Samsung Electronics Co., Ltd.
Samsung Electronics Co., Ltd. inspires the world and shapes the future with transformative ideas and technologies, redefining the worlds of TVs, smartphones, wearable devices, tablets, cameras, digital appliances, printers, medical equipment, network systems, and semiconductor and LED solutions. We are also leading in the Internet of Things space through, among others, our Smart Home and Digital Health initiatives. We employ 319,000 people across 84 countries with annual sales of US $196 billion. To discover more, please visit our official website at www.samsung.com and our official blog at global.samsungtomorrow.com.
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