Memory and display businesses acted as saviours for Samsung in Q1 2017, helping the company post stronger earnings as predicted, with revenue rising 2 percent to 50.5 trillion won (about $44.7 billion).
In the first quarter of this year ending on March 31, the Asia's most valuable company by market capitalisation reported an operating profit of 9.9 trillion won (about $8.7 billion), which was its highest ever figure for the January-March period. Samsung admitted that the record-breaking first quarter profit was due to increased sales of its components business, including the semiconductor division and the display panel segment.
Although the Galaxy S8 and Galaxy S8+ were not released in this three-month period, Samsung's units for developing processors and image sensors improved their earnings due to increased demand for OLED and LCD screens as well as more firepower on devices like smartphones and servers.
However, Samsung's key mobile business disappointed as its revenue dropped due to a decline in flagship product sales. The mobile division reported an operating profit of 2.07 trillion won, down from 3.89 trillion won in the same period a year earlier.
The below par performance of this segment is not surprising, considering the discontinuation of the ill-fated Galaxy Note 7, and an obvious lower demand for the Galaxy S7 series in anticipation of the revamped Galaxy S8. Samsung also didn't announce any new premium product during this period to generate meaningful sales.
After better-than-expected pre-orders for the newly launched Galaxy S8 and Galaxy S8+, Samsung is now hopeful that the latest flagship handset series will make up for the Galaxy Note 7 failure and revive the company's losing mobile business.
"Looking ahead to the second quarter, the company expects to achieve growth on the back of continued robust memory performance together with improved earnings from the mobile business following the global rollout of the Galaxy S8 and S8+," Samsung said in a statement.
Samsung believes that market competition in the mobile business will intensify in the second half of 2017. The company is also worried about expected flat demand for both smartphones and tablets in the coming months.
However, the company expects to maintain profitability through robust sales of the Galaxy S8 and S8+. Some analysts also believe that recent grievances like red-tinted screens, spotty Wi-fi connection and wireless charging issue with the Galaxy S8 will not have a serious impact on the overall sales.
In addition to the success of the Galaxy S8 series, Samsung is also counting on a new flagship phone that it will release later this year.
"The company will aim to improve performance YoY by maximizing sales of the Galaxy S8 and S8+ and successfully launching a new flagship smartphone in the second half. In addition, the company will maintain profitability in the mid- to low-end segment," Samsung said.
Although Samsung didn't name its upcoming premium handset, it's very likely that the company was pointing towards the next-generation Galaxy Note, dubbed the Galaxy Note 8. However, it's unclear whether it will continue with the tainted Note brand, which cost the company billions of dollars.
