Bolstered by strong sales of its first AI smartphone, the Galaxy S24 series, which debuted earlier this year, Samsung Electronics Mobile eXperience (MX) division achieved remarkable results in the first quarter of 2024 despite the contraction of the smartphone market.
According to reports from Samsung, ChosunBiz, and the Korea Economic Daily, the total revenue of Samsung's MX and Networks (NW) divisions, both responsible for smartphones, reached KRW33.5 trillion (US$25.1 billion) in the first quarter of 2024, with an operating profit of KRW3.5 trillion. Compared to the same period in 2023, the combined revenue of these divisions grew by 5%, while operating profit declined by 11%. However, compared to the fourth quarter of 2023, revenue and operating profit saw significant increases of 34% and 29%, respectively.
Despite the continuous rise in component procurement costs, Samsung's operating profit margin was still in double digits at 10%, mainly driven by the market success of the Galaxy S24. Moreover, Samsung's overall revenue and operating profit for the first quarter of 2024 stood at KRW71.9 trillion and KRW6.6 trillion, respectively.
The MX and Networks divisions contributed 47% of the total revenue and 53% of the total operating profit, indicating that Samsung's cornerstone semiconductor business has not fully regained its former strength. The mobile phone sector has managed to contribute around half of the company's quarterly revenue and profit.
Samsung MX division officials noted that since the introduction of the Galaxy S24 series in January 2024, the AI smartphone line has not only attained the milestone of surpassing one million units sold in South Korea at record speed but also established new pre-sale records in emerging markets like India and Pakistan, leading to product shortages in many countries.
Smartphone shipments expected to fall in 2Q
In the first quarter of 2024, Samsung shipped 60 million smartphones and seven million tablets. The Average Selling Price (ASP) for smartphones was approximately US$336. Looking ahead to the second quarter, traditionally an off-season, Samsung is projected to maintain its tablet shipments at a similar level, but its smartphone shipments may decline, with an anticipated fall in ASP.
The introduction of the "Galaxy AI" function in the Galaxy S24 series is widely credited for its significant sales boost, as numerous AI features have captured considerable attention within the industry. Samsung also plans to incorporate AI capabilities into tablets, broadening the market presence of new models in the second half of 2024. The endeavor is aimed at enhancing the overall customer experience of the Galaxy ecosystem.
Samsung expects its revenue performance to rebound significantly in the second half of 2024, driven by innovative products like AI foldable phones and the smart ring, "Galaxy Ring." Industry insiders widely speculate that Samsung may unveil new AI-enabled foldable phones, namely the Galaxy Z Fold 6 and Galaxy Z Flip 6, possibly as early as July. Additionally, the debut of the wearable smart ring, "Galaxy Ring," is expected to coincide with the launch of the Galaxy Watch 7.
Samsung's total smartphone shipments are expected to fall in the off-season of the second quarter, but its MX division officials have affirmed their commitment to maintaining sales of flagship products like the Galaxy S24. They aim to bolster profitability by enhancing operational efficiency and will persist in investing in various Research and Development (R&D) domains, including AI.
In related news, with the Paris Olympics 2024 set to commence on July 26, industry insiders speculate that Samsung might host a "Galaxy Unpacked" event in Paris, France, around July 10. This strategic move aims to leverage the global attention and purchasing power surrounding the Summer Olympics, potentially enhancing Samsung's brand visibility and market impact.
