Following a Q2 in which higher memory sales helped offset smartphone weakness, Samsung sees demand for several businesses improving during the back half of the year.
Last night, the Korean tech and electronics giant reported Q2 revenue of 52.97 trillion won (down 6% annually and equal to $44.3 billion) and operating income of 8.15 trillion won (up 23% and equal to $6.8 billion). Those numbers are slightly above the figures Samsung pre-announced on July 7.
Like those of many peers, Samsung’s smartphone sales fell sharply in Q2 thanks to COVID-19 lockdowns: The company’s Mobile Communications segment revenue fell 18% to 19.8 trillion won ($16.6 billion).
In addition, Samsung’s Consumer Electronics segment, which makes things such as TV sets and home appliances, saw revenue drop 9% to 10.17 trillion won ($8.5 billion), and its Harman unit, which depends heavily on automotive sales, saw revenue drop 39% to 1.54 trillion won ($1.3 billion). And display panel sales -- most of which involve smartphone and TV panels - fell 12% to 6.72 trillion won.
Strong Memory Demand
On the bright side, Samsung’s giant Semiconductor segment saw revenue grow 13% to 18.23 trillion won ($15.3 billion). This was largely driven by a 19% revenue increase for Samsung’s memory unit, which is the world’s biggest supplier of DRAM and NAND flash memory and accounts for about 80% of the company’s chip sales.
Echoing rivals Micron (MU) and SK Hynix, Samsung says it saw strong DRAM and NAND demand from cloud data center clients, and that PC DRAM and NAND sales benefited from healthy laptop demand. These trends helped offset a sequential drop in smartphone memory sales.
Moreover, with the memory industry now seeing a more favorable supply/demand balance following big 2019 capital spending cuts, Samsung’s DRAM average selling price (ASP) rose about 10% sequentially, while its NAND ASP rose by a mid-single digit percentage.
With the help of new smartphone launches -- both its own and those of rivals such as Apple (AAPL) and Huawei -- Samsung sees smartphone memory demand picking up during the seasonally stronger second half of the year. The company also sees next-gen game consoles boosting second-half memory demand.
At the same time, Samsung offered a more mixed outlook for server memory demand. While the company expects “stay-at-home activities” to continue lifting data center memory consumption, it cautions that some of the first-half server memory strength it saw was due to customer inventory buildups, and that this inventory could get digested later this year.
The comments come a week after Intel forecast its server CPU unit’s sales growth would slow considerably in Q3 and Q4, following very strong Q1 and Q2 growth rates. Intel partly attributed this slowdown to weaker demand from customers servicing enterprise and government server buyers.
In late June, Micron also suggested some customers are stockpiling inventories, albeit while indicating the buildups involved mobile and automotive clients.
Expectations for Other Businesses
Ahead of an Aug. 5 event where Samsung is expected to unveil its Galaxy Note 20 and Galaxy Fold 2 phones, Samsung says smartphone demand “has been showing a gradual recovery since June,” and that its smartphone sales are expected to be up sequentially in Q3. The company also sees its sales mix shifting more towards the high-end this quarter.
However -- shortly after Qualcomm (QCOM) forecast global phone shipments would be down about 15% annually in Q3 -- Samsung cautioned that there’s still considerable uncertainty regarding near-term smartphone demand due to COVID-19. The company also expects to see “intense competition” during the back half of the year, as smartphone rivals try to make up for low first-half sales.
Separately, Samsung expects TV sales to rise in Q3 due to pent-up demand from consumers. And it thinks earnings for its display panel business “may improve somewhat” in Q3, ahead of a larger improvement in Q4.
Also -- in comments that might please OLED materials and IP supplier Universal Display (OLED) -- Samsung says it plans to grow its OLED panel sales, which today skew heavily towards smartphones, in areas such as foldable devices and IT hardware.