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Sluggish Galaxy S9 sales lead to second-quarter slump for Samsung

After four quarters of record profits, things have taken a turn for Samsung.  The South Korean tech giant announced that its second quarter net profit was flat, due in part to a drop in smartphones profitability.

Overall Samsung reported quarterly revenue at 58.48 trillion South Korean won ($52.27 billion), a 4-percent drop from this time last year. Overall profit however came in at 14.87 trillion won ($13.28 billion), around a six-percent increase year-over -year

For its second quarter, Samsung posted a decline in revenue for its mobile business. Revenues for the quarter came in at 24 trillion won ($21 billion), down 20 percent from this time last year. Operating profit also took a sharp turn, down to 2.67 trillion won ($2.38 billion) from 4.06 trillion won ($3.63 billion) this time last year.

The mobile phone division however is eager to make a turnaround for the third quarter and is taking aggressive steps to do so. It’s releasing its flagship Samsung Galaxy Note 9 on August 9, earlier than anticipated to allow more sales in the third quarter. It also stated it will become more aggressive on pricing.

The report confirmed an earlier report by analyst Lee Seung-woo of Eugene Investments, who predicted slow sales of the  Galaxy S9 would dampen earnings this quarter. He expects the Samsung to ship about 31 million Galaxy S9 handsets in 2018. That number falls far below Samsung’s sales target of 43 million Galaxy S9 handsets.

In addition to slow sales for the Galaxy S9, Samsung also stated softer sales on smartphone displays affected overall earnings for the quarter. In its quarterly statement Samsung reported that “weak demand for flexible OLED panels in the second quarter while the shipment and price for LCD panels also fell.” Additionally, Apple’s reported decision to shift more handsets from OLED displays to LCDs may have have something to do with the slump.

The company was boosted however by strong sales of memory chips. Samsung Electronics became the No. 1 supplier of semiconductors worldwide in 2017 and its sales of memory chips continue to outpace its competitors by a long distance. Strong demand for DRAM chips and NAND flash memory helped the company improve its quarter overall.

Samsung may see a boost in fourth-quarter sales, though. The company is expected to announce new hardware in August, including the Galaxy Note 9, Samsung Gear S4, and Samsung Galaxy Tab S4. The products would likely go on sale during the third quarter, giving an extra bump to sales before the holiday season starts.

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