Samsung's Billion-Dollar Cash Cows!

Samsung Electronics had a terrific earnings report for the quarter ended September 2020. The South Korean tech giant is in a formidable and unique position where it is making money not only through its own vertically integrated offerings but also by selling technology solutions to its competitors.

We have been extensively covering Samsung, one of the world’s leading consumer brands. While its consumer business is vertically integrated, its B2B tech solutions business is horizontal and drives bottoms lines. We have written about where it all started. Here are the key takeaways from Samsung Electronics’ Q3 2020 numbers:

▸Revenue: $56.3 billion (+8% YoY, +30% QoQ)

▸Profit: $10.3 billion (+59% YoY, +55% QoQ)

▸The earnings were driven by strong performances across Semiconductors (Memory) and Telecom (Mobile+Networks) businesses. Consumer Electronics divisions saw a bump as well.

▸Semiconductors and Telecom businesses together contributed to almost three-fourths of Samsung’s total revenue and 81% of the total profit in Q3 2020.

▸Semiconductors division’s revenue was up 7.3% YoY and profit up 82% YoY, while the Telecom division’s revenue was up 4.7% YoY and profit up 53% YoY.


Source: Counterpoint Q3 2020 Market Monitor, OEM Analysis

▸Memory division was the star, thanks to the growing need for Flash storage and DRAM across mobile phones, PCs and data centers.

▸The rise of AI, IoT and 5G will accelerate this need further across newer applications such as autonomous systems and Edge Cloud deployments.

▸Within Semiconductors, the LSI (chipsets, sensors, etc) and foundry business has been gaining steam for mobile and HPC applications.

▸Samsung’s Mobile division’s key competitors are also some of the key customers for its semiconductors business, an intriguing relationship.

▸Talking about its Telecom division, Samsung Mobile is benefitting a lot from the US stranglehold on Huawei and anti-China sentiments in India, the world’s second-largest mobile phone market. This is well supported by its world’s largest channels reach for any mobile phone vendor and a broader portfolio of mobile devices, ranging from a Samsung Guru Music 2 feature phone to the sub-$80 Galaxy Core M01, the flagship Samsung Galaxy S20 and Note 20 series and the Galaxy Fold series, the innovative line of foldable phones.

▸In addition to the mobile phone segment, Samsung has seen a growing demand for its offerings in the 5G network infrastructure market, with great operator wins across North America, South Korea, Europe and other regions, building upon its key wins in India (Jio) and South Korea in the 4G era.

▸Its display business will continue to expand and the Consumer Electronics business will see a bump as the COVID-19 situation has driven demand for electronics and appliances. A cohesive intelligent connected home story can further boost Samsung’s prospects.

Moving forward, Apple is likely to see its super-cycle with the new iPhone 12 series, even as Samsung’s semiconductor and display business benefits handsomely. Huawei’s struggles will help Samsung’s position in other key markets such as Europe, MEA and Latin America, not only for the devices business but also for the network infrastructure business. The growing demand for memory across various applications and strong demand from some of its LSI customers (like Qualcomm) should provide further scale and boost both the top and bottom lines.

Overall, Samsung is strongly positioned for all of its business segments in the short- to mid-term.

Samsung Electronics : Q2 2018 : Tale of Two Business Units :: Semiconductor the Star

We mentioned in the previous post (here) how Samsung is transforming into semiconductor and systems company. Now we have more evidence that the horizontal semiconductor business is becoming really core to overall Samsung Electronics showcasing the real strong DNA of the Korean technology giant. The latest results for Samsung’s corporate level Q2 2018 performance is out, here is our analysis.

  • Samsung Electronics clocked a massive US$54 Billion revenues in Q2 2018
  • However, the revenues were flat YoY  and down -4% QoQ after peaking in Q4 2017 due to  the holiday season.
  • The holiday season in Q4 2017 fueled the downstream end market demand for its semiconductor and smartphone business.
  • The Mobile & Display Panel business revenues declined -18% & -23% YoY respectively.
  • This downturn was due to weaker demand for its newly launched flagship S9 series putting pressure on mobile business & slow demand for Flexible OLED due to a seasonally slow quarter for most of its key customers
  • However, offsetting these two businesses weaker performances was its semiconductor business.
  • The semiconductor business (memory (NAND + DRAM), LSI & foundry) saw revenues grow a massive +31% YoY
  • Further, Samsung continued to clock more than US$20Billion+ Operating Profits with healthy 25% margins
  • However, the tremendous growth in the bottom lines can also be attributed to strong performance by semiconductor division.
  • Samsung enjoyed the rising demand for high density memory for servers riding on the cloud computing and AI wave.
  • Demand for SSDs storage solutions for datacenters to store the enormous flow of data being generated by IoT devices, smartphones, applications usage and so forth.

  • The adoption of advanced configurations in NAND Flash (128GB+) & DRAM (3GB+) in smartphones across key customers continued to rise
  • This also fueled the growth of semiconductor business and contributed to the bottom lines
  • The mismatch between demand and supply for high density memories is at all-time-high leading to significant uptick in ASPs
  • This has led to healthy margins for Samsung which is the leading manufacturer and supplier of memory bits globally.
  • However, the contribution from mobile division to the top line and bottom line reduced.
  • This was mainly due to ASP and model mix shifted towards the refreshed J series portfolio towards  the second half of the quarter with strong gains in emerging markets such as India.
  • The Galaxy S9 series had softer than usual reception which also compounded negative growth annually for mobile division
  • Globally Samsung’s smartphone division market share declined to 20% from 22% a year ago as smartphone shipments reached 71.6 million units down 10% YoY.
  • The following chart narrates the tale of the two key divisions for Samsung : IM( Telecom) & Semiconductor and its impact on bottom lines and how they have grown over the years. Semiconductor division now contributes to 78% of the total Samsung Electronics’ operating profits.
  • It is ironical that, the customers (Apple, Chinese brands, Qualcomm) driving part of the semiconductor business growth have actually impacted the mobile business.
  • But this is how it is, when you are much better horizontal component vendor but also a vertical finished goods vendor with some inertia.


The complete analysis and charts on Samsung’s Q2 2018 corporate is available for Counterpoint clients at our research portal 

Samsung Transforming into a Semiconductor and Systems Company

  • Samsung today announced its fourth quarter (Oct-Dec) 2017 and full year results. The results have been good but also indicate how Samsung Electronics has been transforming from a B2C to a B2B company.
  • The Korean giant recorded a solid performance generating its highest ever, ~$60 Billion revenues in a quarter with operating profit of close to $19 Billion in the last three months of 2017.
  • For the full year, Samsung generated its highest ever annual revenues of $212 Billion and an operating profit of close to $48 Billion.
  • Samsung generated more profit in 2017 than in 2016 + 2015 full years combined
  • This is a phenomenal growth story for Samsung Electronics as the bulk of the growth in the top and bottom lines is not driven by the mobile division but the semiconductor division.
  • The demand for Samsung’s Memory solutions have skyrocketed as both NAND Flash (see here) and DRAM memory (see here) have become an important component for smartphonecomputing and cloud datacenter applications
  • The move to higher storage capacities started with Apple’s iPhone and adopted well by Chinese brands have kept the demand for memory bits at an all-time-high.
  • However, the industry is quickly moving towards 3D NAND and especially towards TLC 3D NAND, which will further ease some supply pressure and bring memory prices to more reasonable levels.  (see here more on 3D NAND here in this free report)
  • Samsung Semiconductor (LSI+ Memory) now contributes close to three-fourths of the operating profits, thanks to rising demand for memory as well as the tight supply situation that kept memory component prices at all time highs.
  • Samsung’s Semiconductor division revenues grew 50% YoY in Q4 2017 and profits jumped a massive 131% YoY as Samsung benefits from the economies of scale.
  • Samsung Semiconductor now enjoys almost 52% Operating margins on its solutions. If you leave out of LSI and the foundry business, the memory sub-division profits will be higher still. Comparatively, the mobile business is around the 10% level.
  • Meanwhile, the Samsung Display business has been riding high on the iPhone X OLED model launch and saw a 58% YoY bump in Q4 revenues, though just a 10% uplift in operating profits. This is due to the cost of the custom-made display for Apple. As the costs are spread over the lifetime of the device, we should expect profits to rise (see here – How Samsung became Apple’s Top Supplier).
  • While Samsung Semiconductor has been the star performer, Samsung Mobile has its work cut out for 2018 to jump back to growth after losing the leadership position in world’s three most important and biggest mobile marketsChina (see here), India (see here) and USA (see here).
  • Europe, Middle East Africa and Latin America are still strongholds for Samsung, but brands such as Huawei, Moto, Tecno Group, BBK Group (OPPO, Vivo & OnePlus) and Xiaomi are poised to challenge the Korean vendor this year.
  • Overall, a strong quarter for Samsung Electronics as the component business continued to outperform the consumer business, effectively transforming Samsung into a semiconductor and systems company. Samsung’s component business is poised to surpass its DMC (CE + Telecom) business

Exhibit 1: Samsung Revenue & Profit Trends

Exhibit 2: Samsung Semiconductor (Memory+LSI) vs Samsung Mobile Operating Profit Trends

Exhibit 3: Samsung Operating Profits Share By Business Units

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