Operating profit for the Samsung Electronics MX (mobile experience) and NW (network) institutional sector in the third quarter rose about 30% from a year earlier. The average selling price (ASP) increased thanks to the strong performance of the Galaxy Z Fold7 (Fold7), released in July.
Samsung Electronics said on the 30th that third-quarter sales for the MX and NW divisions came to 34.1 trillion won, up 12% (3.6 trillion won) from the previous year (30.5 trillion won), in its earnings announcement. Operating profit for the same period reached 3.6 trillion won, up 28.5% (about 800 billion won) from the previous year (about 2.8 trillion won).
The ASP of the smartphone business in the third quarter was $304 (432,000 won), up 3% and 12% from the third quarter of last year ($295) and the second quarter of this year ($270), respectively. ASP is an indicator that shows the average price of products sold. A higher ASP means that sales of premium models increased by that much.
◇ Impact of high-priced smartphone "Fold7" boom… popular overseas too
Samsung Electronics said sales and profitability improved as its new smartphone released in July gained popularity. In particular, for the Fold7, domestic preorders reached 1.04 million units, the highest preorder volume ever among foldable phones. The Fold7's factory price ranges from 2,379,300 won (256GB) to 2,537,700 won (512GB), placing it among the high-priced models in Samsung Electronics' smartphone lineup.
The foldable series also resonated overseas. According to Samsung Electronics, the foldable series recorded the highest preorder volume ever for a Samsung foldable phone series in the United States. Total preorders for the Galaxy Z 7 series increased more than 25% from the previous model, and reservations through local mobile carriers surged more than 60% from the previous model. In India, an emerging market, Samsung Electronics also surpassed Apple (48%) for the first time by recording a 49% share in the ultra-high-priced smartphone market priced at 70,000 rupees (about 1.1 million won) or more. It also posted strong results in Japan, where the iPhone is dominant, taking the top spot in online shops.
Third-quarter results for the Samsung Electronics MX and NW businesses this year were better than in the first quarter of 2024, when the Galaxy S24 series, the first artificial intelligence (AI) phone, was released. At launch, the Galaxy S24 set the fastest 1 million-unit sales record among the S series in Korea. In the first quarter of 2024, the MX and NW division posted sales of 33.53 trillion won and operating profit of 3.51 trillion won.
◇ Fourth quarter likely to see limited improvement… "Price competition and cost pressures"
However, it is uncertain whether Samsung Electronics will maintain its growth through the fourth quarter. Samsung Electronics plans to increase the share of midrange and budget models such as the Galaxy A series in the fourth quarter, but it faces price competition with Chinese companies such as Huawei and Xiaomi. ASP tends to fall as sales of entry-level or midrange models increase.
Competition is also intensifying in premium lines such as foldable phones. Samsung Electronics ceded the No. 1 spot in market share to Motorola in the United States. According to U.S. market research firm BayStreet Research, from January to July this year, Motorola's share (by shipments) in the U.S. flip-type foldable phone market reached 78%, surpassing Samsung Electronics (22%) for the top spot.
Cost pressures are also expected to grow. As memory chipmakers focus on producing high-bandwidth memory (HBM), the supply of commodity DRAM has tightened. Samsung Electronics has kept factory prices unchanged despite rising component costs. Samsung Electronics said, "Along with efforts to optimize processes such as standardizing components, we will continue to improve inefficiencies and push cost-reduction activities."
Kim Un-ho, an analyst at IBK Securities, said, "Third-quarter MX operating profit was better than expected. It is analyzed that there was sufficient room for improvement due to the increased volume of foldable phones. The decline in the share of flagship models was offset by new product launches." However, "In the fourth quarter, both sales and operating profit are expected to decrease from the third quarter due to lower volumes and ASP. Rising materials and supplies prices will also be negative for profitability," Kim added.