Samsung introduced its new Galaxy S21 lineup earlier than normal.
Sarah Tew/CNET
Samsung benefited in the fourth quarter from strong demand for technologies that help people during the pandemic — like TVs — but its mobile business couldn’t quite compete with Apple’s new iPhone 12 lineup.
The South Korean giant on Wednesday said its overall fourth-quarter revenue climbed 2.8% from the previous year, but its mobile business sales tumbled 11%. The results contrast with Samsung’s chief rival, Apple. The iPhone giant earlier Wednesday reported its highest revenue ever as it benefited from soaring demand for its new iPhones. Apple’s mobile business revenue jumped about 17% from the previous year.
Samsung said its mobile revenue fell because of “intensified competition in the year-end season,” and its mobile profits suffered from higher marketing costs. Its display business, meanwhile, posted its highest earnings ever as Samsung sold more panels for smartphones and pricier TVs.
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Going forward, Samsung expects its Galaxy S21 lineup, which it introduced this month at a $200 lower starting price than the Galaxy S20, to boost its results in the first quarter. And the “upcoming release of new mass-market products will also contribute to the growth in the first quarter.” Still, its companywide profit in the first quarter likely will be lower as a stronger Korean won hurts its memory chip business. Samsung also expects to be hurt by costs associated with new production lines for its processors, despite “solid” demand for memory chips in mobile devices and data centers.
For the full year, Samsung expects its mobile business to benefit from its efforts to “strengthen leadership in [its] flagship lineup by expanding S21 sales and popularizing the foldable category,” which likely includes lowering prices for its Galaxy Z Flip and Z Fold devices. Samsung said it also will “increase smartphone sales by fully addressing replacement demand for 5G with mass-market 5G models.”
“In 2021, market demand is likely to recover to pre-COVID levels backed by gradual recovery in the economy and accelerating expansion of the 5G market,” Samsung said in a press release. Still, it warned that “uncertainties persist over the possibility of recurring COVID-19 waves.”
In October, Samsung warned that the fourth quarter would be weaker than the third as server customers bought fewer memory chips. It also said tougher smartphone competition would hurt its results. Apple, in particular, was a tough rival for Samsung in late 2020. Apple introduced four new iPhones in the quarter, all of which came with 5G connectivity.
Like its competition, Samsung is grappling with the coronavirus pandemic and the impact it’s having on consumers. When COVID-19 first started spreading, worries about the illness caused a dramatic slowdown in phone purchases as people around the globe decided the device they had was good enough. Demand eventually recovered as new 5G phones began to hit the market, but not soon enough to boost Samsung’s Galaxy S20 sales.
Pandemic demand
Computers and TVs have been hot items with people stuck at home, and appliances are purchases consumers can put off only so long. Samsung has benefited from surging demand for all of those products, as well as for its components that provide memory storage for data centers and consumer devices. In October, Samsung reported its highest ever quarterly revenue, thanks to “significant increase in consumer demand” for its smartphones, computers and other products.
Apple’s entry into the 5G phone market with its full iPhone 12 lineup in October likely hurt Samsung in the last quarter of the year. By the end of 2020, Samsung had introduced about 20 5G phones, but there haven’t been compelling reasons for consumers to need them. People are holding onto devices longer than before, and early 5G devices have been pricey. Apple brought 5G to all phones in its iPhone 12 lineup without boosting pricing for its Pro models. And it even introduced a less expensive iPhone 12 Mini to people who are more price conscious.
On Wednesday, Apple said its iPhone business generated $65.6 billion in sales, up more than 17% from the $56 billion it reported last year. And that’s despite some iPhone models still being hard to find since they hit the market in October. Each of Apple’s others businesses also grew at double-digit rates, showing how people turned to its entertainment, health and education-focused products throughout the year as they adapted to life in the pandemic.
The pandemic, meanwhile, has forced Samsung to shift strategy for some of its mobile products, including introducing a less expensive model of the Galaxy S20, called the S20 FE. And it held its Galaxy 21 launch in mid-January, about a month earlier than normal. The most notable difference from last year’s Galaxy S20 lineup is the lower price, with each model retailing for $200 less than its predecessor. The company hopes the lower price tag will help it attract buyers who had delayed upgrading their devices.
Samsung’s fourth-quarter results won’t benefit from those devices, which hit stores Friday.
For the fourth quarter, Samsung said its operating profit rose 26% to 9.05 trillion Korean won ($8.2 billion) as the company benefited from demand for its displays and memory chips. And it reported revenue of 62.55 trillion Korean won ($56.4 billion), up slightly from 59.88 trillion Korean won a year ago.
Samsung in early January said it expected to report a fourth-quarter operating profit of 9 trillion Korean won ($8.2 billion), up from 7.16 trillion Korean won ($6.5 billion) a year ago but below the third quarter’s level of 12.4 trillion won. The fourth-quarter amount was about half a trillion won lower than analysts expected, according to a poll by Bloomberg. Samsung at the time said its sales would climb to 61 trillion Korean won ($55.8 billion) from 59.9 trillion Korean won ($54.7 billion) in the fourth quarter of 2019.
