Samsung on Tuesday admitted that its latest smartphone flagship, the Galaxy S9/S9+, is not selling as well as its predecessor. The results mirror a general slowdown in the smartphone industry, and they come ahead of Apple’s next earnings announcement, which will of course provide iPhone sales numbers for the same period.
Samsung posted an operating profit of $13.3 billion on revenues of $52 billion for the quarter ending June 30. Those are solid numbers—profits rose 6 percent while revenues fell 4 percent—but Samsung’s stock is heading down because of the firm’s warnings on smartphone sales.
“Second quarter revenue fell due to softer sales of smartphones and display panels, despite robust demand for memory chips,” Samsung noted. “The continued strength of the company’s memory business contributed to the higher operating profit.”
Noting the “stagnant” smartphone market—late last year, you may recall, marked the first time that sales didn’t grow year over year—Samsung says that the division responsible for the Galaxy line of devices reported “a drop in earnings, both year-on-year and quarter-on-quarter. And it specifically blamed “slow sales of the Galaxy S9.”
Looking forward, Samsung does offer some hope for improvements: Customers are choosing devices with more storage, which are more expensive and more profitable. And sales should improve in the second half of 2018, thanks to a normal seasonal uptick.
But with competition “intensifying”—Apple is rumored to be readying three new iPhone models for this fall—Samsung will introduce its new Galaxy Note 9 “earlier than usual,” and the device will offer customers “exceptional performance for a reasonable price,” the firm says. Indeed, lowering prices across the board seems to be part of the overall strategy going forward.
That’s smart. As I repeated yesterday, Google continues to price itself out of the competition when it comes to smartphones. And even Apple hasn’t been able to sell as many iPhone X smartphones—at $1000 per unit—as it had expected. Perhaps the entire industry will do a little reset this year.