Samsung recently revealed what its second-quarter earnings figures should look like when it soon reports the final numbers. The manufacturer says it expects to report a 7% annual decrease in second-quarter revenue to 52 trillion Korean won. At the current exchange rate, that equates to $ 46 billion dollars. Operating profit for the three months ended June is estimated at 8.1 trillion Korean won ($ 6.6 billion), up 23% year-over-year.
The results exceeded analyst consensus estimates of 51 trillion won in operating income and profit of 6.5 trillion won. Helping Sammy exceed analyst expectations was a one-time payment of $ 950 million that the company received from Apple. DSCC says the money was due to Samsung when Apple purchased fewer OLED panels from the company than stipulated in the terms of its contract. Thanks to this payment, Samsung’s display device unit reported a profit for the quarter rather than a loss. During the same quarter last year, Apple reportedly paid Samsung $ 770 million for a deficit in orders for OLED panels. The contract required Samsung to deliver 100 million panels at approximately $ 70 per pop.
Apple is still addicted to Samsung as an iPhone provider
Apple has been trying to reduce its dependence on Samsung as an iPhone provider. After all, does Coca-Cola buy cola syrup from Pepsi? Samsung has been the largest provider of Apple OLED panels for iPhone and Apple has been looking to add glass from LG and Beijing Oriental Electronics (BOE). However, earlier this year it was alleged that BOE had failed a quality test by Apple. Ironically, BOE allegedly failed a quality test by Samsung, which is allegedly considering the company’s OLED displays for the flagship 2021 Galaxy S21 models.
Samsung’s recent quarterly reports. DSCC credit
Samsung’s semiconductor business saw strong demand for memory chips used by cloud computing companies looking to expand their capacity as more people are forced to work from home. With DRAM and NAND flash memory chip prices on the rise, Samsung earned an estimated 5 trillion Korean won in the second quarter. Samsung’s mobile and consumer businesses were hit by the pandemic during the three months, but the results were not as bad as expected. Still, The company’s flagship series, Galaxy S20, is performing poorly in the states, behind the numbers presented by the Galaxy S10 and Galaxy S9 lines in 2019 and 2018, respectively. On August 5, Samsung is expected to present the Galaxy Note 20 line. We should also see the foldable Galaxy Z Note 2 and Galaxy Z Flip 5G in the near future.
Sammy’s problems at the cash register can be seen in other data. In April and May Huawei became the world’s leading smartphone maker. May’s numbers showed the Chinese manufacturer with a slim lead over Samsung; Huawei was responsible for 19.7% of global smartphone shipments in May compared to 19.6% for Samsung. What could really harm Samsung in the United States is the devastated economy. Millions of Americans are out of work and the money that could normally be used to buy an expensive phone must now be used to put food on the table.
The full second-quarter earnings report will be released later this month. As for Apple, the flip side of the coin is that when it reports its fiscal third-quarter earnings on July 30, it will have to account for the payment to Samsung somewhere in its financial report. Most investors can shrug with one-off payments like this, so it shouldn’t affect Apple. The only negative is that Apple can’t seem to end its addiction to Samsung.
