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Samsung's mobile biz braces for white-knuckle ride in Q2

Samsung Electronics expects smartphone demand to "drop sharply in most regions" during the second quarter.

The economic downturn caused by COVID-19, plus the impact of store closures, has meant a shrinking market for products sold by Samsung's IT and mobile communications (IM) business unit.

The start of a COVID-19 wobble at IM was already apparent in Q1. The division posted revenue of 26 trillion Korean won (US$21.3 billion), down 4% from the same period last year.

By trimming marketing expenses and by increasing the sales portion of 5G models, however, IM's operating income held steady at KRW2.65 trillion ($2.1 billion), up from KRW2.27 trillion ($1.9 billion) in Q1 2019. That makes for a fairly respectable operating margin of 10.2%.

Samsung does not give a performance breakout of its network's business that sits within IM, but the South Korean behemoth warned that 5G infrastructure investments may face reductions or delays – both internationally and domestically – during Q2.

The South Korean government's desire for the country's big three operators to spend more on 5G may well have to wait longer than previously expected.

Samsung's semiconductor business, which contributes the bulk of revenue at the Device Solutions (DS) division, posted a healthy 22% increase in Q1 revenue, year-on-year, to KRW17.64 trillion ($14.5 billion). Strong PC and data center demand, which Samsung expects to remain solid in Q2 as more people work from home, is giving the DS division some resilience during the pandemic.

Consolidated Q1 revenue at Samsung Electronics was KRW55.33 trillion ($45.5 billion), up from KRW52.39 trillion ($43.1 billion) during the first quarter in 2019.

EBITDA margin remained pretty steady at 24% (25% in Q1 2019).

— Ken Wieland, contributing editor, special to Light Reading

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