South Korea's two giant smartphone makers Samsung Electronics and LG Electronics are expected to report gloomy earnings in the third quarter amid the prolonged global economic slowdown, worsening exchange rate in emerging markets and saturated smartphone markets.
The market consensus compiled by 23 securities firms stands at 50.2 trillion won in sales and 6.6 trillion won in operating profit. This is a 1.7 trillion won increase in sales and a 300 billion won drop from the previous quarter.
Among the figure, the operating profit from the firm’s IM (Information Technology and Mobile) sector is expected to post around 2.1 trillion won, a 24 percent fall from the second quarter.
Industry observers said although the two firms sold more smartphones compared to the previous quarter, they saw sluggish sales in their premium phones with high average price.
As to Samsung Electronics, its budget smartphones including Galaxy J3 and Galaxy J5 led the company’s sales rather than premium phones such as Galaxy S6, Galaxy Note5 and Galaxy S6 Edge Plus.
Lee Seung-woo, an analyst from IBK Investment & Securities, said, "Samsung's smartphone shipments in the third quarter is expected to be around 82 million units, a rise from the second quarter's 72 million units," adding, "However, the leading factor of the rise in the smartphone was Galaxy J series worth less $200 and the shipments of its premium phone Galaxy S6 has dropped."
LG Electronics is not also expected to report grim earnings outlook in its smartphone business.
Market observers say LG Electronics' operating profit in the third quarter is forecast to be between 237 billion won and 263 billion won, a similar level to the second quarter. Among the number, the firm’s mobile communications sector is expected to see a loss.
Experts said LG Electronics did not roll out any high-end smartphones in the third quarter and its high-end smartphone G4 launched in the North and Central America along with South Korean market saw sluggish sales.
"Due to the weak sales of pricey smartphones in the third quarter, the firm's mobile communication division is expected to record a deficit in six quarters, and its operating profit is expected to drop by 49 percent on-year," said Kim Sang-pyo, an analyst of KB Investment & Securities.