Samsung reviews Poor Quarter and Warns that the months ahead will be Painful as Supply Chain Disruptions Continue
Samsung is warning that the months ahead will be painful as the coronavirus pandemic disrupts global supply chains, hurts smartphone demand, complicates the adoption of 5G technology and more.
But the South Korean conglomerate also says the crisis has sparked a fundamental change in how people live — and predicted that the world's reliance on digital services is here to stay as millions of people hunker down at home.
A shrinking smartphone market and store closures will lead to an "inevitable" drop in earnings for the current quarter, Jongmin Lee, Samsung's vice president of mobile, said on an earnings call.
Samsung said the outbreak has changed the way people live and work. And while waning interest in consumer electronics will hurt the demand for the memory chips that power those products, the company said it expects memory chip demand from servers and data centers to last long after the pandemic ends.
"The way of the future, people spending more time working and learning online, that has become the new normal for many people as a result of COVID-19," Ben Suh, Samsung's executive vice president of investor relations, said through a translator.
The "stay-at-home economy" has led to more people playing games online, shopping online and streaming movies at home, and "we think this will actually stick as a new lifestyle for consumers," Ben said.
Ben added that ""It's difficult to rule out that if the COVID-19 impact expands or becomes more prolonged, carriers may decide to delay 5G investment, which may have a negative impact on our business."
Jefferies analyst Edison Lee warns that because of COVID-19 as well as other factors, 5G smartphone sales will also be weaker than expected this year, especially in China, the world's largest smartphone market.
Chinese consumers won't be snapping up 5G phones because there are few innovative apps to make consumers excited about 5G, there's limited network coverage and mobile carriers likely won't subsidize pricey 5G handsets, Lee wrote in an analyst note last week.
The slowdown in 5G sales may be good for Apple as predictions for Apple's 5G iPhones with mmWave have been in doubt for 2020.
Apple is holding their Q2 2020 Financial Results in a Conference Call tomorrow afternoon. While Apple preannounced that they would miss their guidance for the quarter, there have been some really bright spots for Apple that we touched on this morning's report titled "In Calendar Q1 Apple did Exceedingly Well in India and especially China where the iPhone 11 was the number one Smartphone."
Apple's CEO is bound to highlight all that was good for the quarter and their momentum going into calendar Q2 (Fiscal Q3).