Samsung profits fall 95%, but why it is not the company’s ‘problem’ alone

Samsung posted a 95% drop in profits for the second quarter of the year 2023. This is the second time in a row that the company has seen its profits drop over 90%. The South Korean giant’s operating profit during the quarter was KRW 0.67 trillion ($523.5 million), down from KRW 14.12 trillion ($11.06 billion) during the same period last year. Samsung said that the huge drop is the result of the continuing decline in smartphone shipments.

“Sales decreased sequentially for the MX Business as the effect of the Galaxy S23 launch from Q1 faded. Mass market recovery was also delayed due to the continued economic downturn, affecting Q2 sales. Nevertheless, the Galaxy S23 series was able to achieve higher results than its predecessor in the first half, in terms of both volume and value,” the company said in a statement.
But why it is not Samsung’s ‘problem’ alone

Samsung’s smartphone business has been struggling for the past few months. However, the fall in the company’s smartphone shipments are not alone to be blamed for the drastic fall in profits. As much of the impact that the declining smartphone market is having on Samsung is not only from the company’s own Galaxy devices directly. Samsung Electronics also supplies a large part of the memory and storage for other smartphone makers. The company is also one of the world’s largest suppliers of displays including that for Apple through Samsung Display. So the general fall in smartphone shipments across brands has also impacted Samsung. The smartphone market on a whole continues to fall. Latest reports from research companies including IDC, Counterpoint Research and Strategy Analytics have pointed to the degrowth in the smartphone market.
Silver Lining in sight
On a positive note, the reports also signal that the worst may be over for the segment. Global demand is expected to gradually recover in the second half of the year which should lead to an improvement in earnings driven by the component business. Reports suggest bounce back especially in the premium segment.
Samsung on its part sees the latest foldable smartphones, Galaxy Z Flip5 and Galaxy Z Fold5 — helping boost sales. “The MX Business will focus on the newly launched Galaxy Z Flip 5 and Galaxy Z Fold 5 series — which feature refined and differentiated user experiences – further fortifying its leadership in the global foldable smartphone market,” said the company in its earnings release.