SamMobile has affiliate and sponsored partnerships. If you buy something through one of these links, we may earn a commission.

News For You
News For You
Notifications

Samsung closes profitability gap with Apple no thanks to smartphones

Business
By 

Last updated: May 3rd, 2018 at 10:17 UTC+02:00

Samsung and Apple have both posted their earnings results for this past quarter and the numbers show that Samsung has done a great job at closing the profitability gap with its biggest rival. However, while the iPhone drives much of Apple's profits, it's a different story over at Samsung. So even though Samsung has been able to narrow the profitability gap with Apple, it has done that without any substantial contributions from its smartphone division.

Semiconductors steal the show again

Apple posted sales of $61.1 billion this past quarter and an operating profit of $15.8 billion. This brings the company's operating profit-to-sales ratio to 26 percent, slightly down from 26.7 percent a year earlier.

Samsung beat market expectations with its Q1 2018 earnings as it posted a 57.6 percent surge in profit for the January-March 2018 period. The company posted sales of over $56 billion and an operating profit of $14.4 billion. This brings Samsung's operating profit-to-sales ratio to 25.8 percent.

It's a big achievement on Samsung's part as Apple was ahead by more than 10 percentage points in the profit-to-sale ratio for 2016. Market observers say that Samsung has been successful in increasing its profit margins and now appears to be gaining on Apple in this metric. Some even expect Samsung to post a higher operating profit-to-sales ratio than Apple in the second quarter of this year, though that could partly be because of Apple's historically weaker earnings in the April-June period. That's when iPhone sales slow down a bit in anticipation of the newer models.

We recently explained in detail why Samsung may never earn the kind of profits that Apple does from smartphones. Apple ships fewer handsets than Samsung but makes more money while Samsung enjoys leading the market in terms of volume shipments but it makes less money from smartphones. That's because it caters to all three market segments and profit margins are wildly different in each.

So while it's impressive that Samsung has closed this gap, it has been able to do this because its semiconductor division continues to mint money. The bulk of Samsung's profits actually come from its semiconductor division which is riding a wave of high prices and subsequently higher profits in the memory market.

Things can go sour pretty quickly from Samsung if it comes under intense pressure in the memory market. The company is already facing a lawsuit along with other memory suppliers alleging that they colluded to artificially raise prices of memory products.

Via Business Earningssemiconductors
Galaxy AI summarized

Scroll for more related content
News For You

You might also like

Samsung’s profit surged 15x in Q2 2024, thanks to the AI boom

Samsung’s profit surged 15x in Q2 2024, thanks to the AI boom

Samsung has had a rough couple of years, but the company has emerged with full force to ride the AI boom. The company revealed that it expects its Q2 2024 operating profit to surge 15x, thanks to strong sales of semiconductor chips. These figures are better than market estimates. Samsung's Q2 2024 profit could be […]

  • By Asif Iqbal Shaik
  • 6 days ago
Samsung’s battery sales decline despite higher EV business

Samsung’s battery sales decline despite higher EV business

Samsung has a battery manufacturing division called Samsung SDI, which makes batteries for products ranging from smartphones to EVs. Earlier today, Samsung SDI announced its financial results for Q1 2024. The company's sales have fallen despite higher EV business, but the company vows to become a “global top-tier company by 2030.” Samsung SDI profits fall […]

  • By Asif Iqbal Shaik
  • 2 months ago
Samsung profit jumps 933% to $4.8 billion in Q1 2024, beating estimates

Samsung profit jumps 933% to $4.8 billion in Q1 2024, beating estimates

Samsung has revealed its financial results for the first quarter of this year, a few weeks after revealing revenue estimates. The company revealed that its revenue rose 13% compared to Q1 2023, while its profit skyrocketed nearly 10x (933%) compared to the year earlier. Samsung's profit jumps nearly 10x in Q1 2024, thanks to strong […]

  • By Asif Iqbal Shaik
  • 2 months ago
Samsung’s profit rises by 931% in Q1 2024 as chip sales recover

Samsung’s profit rises by 931% in Q1 2024 as chip sales recover

Samsung has been struggling over the past couple of years, especially due to its most important product: memory chips. However, things now seem to be improving financially, as the company has reported a huge rise in its profit. Earlier today, Samsung revealed its earnings guidance for Q1 2024. Samsung's profit rises 931% on the back […]

  • By Asif Iqbal Shaik
  • 3 months ago
US government gives GlobalFoundries a $3.1 billion package to make more chips

US government gives GlobalFoundries a $3.1 billion package to make more chips

The US government has become very serious about increasing production of advanced semiconductors at home. To that end, the company is strategically providing grants and loans to eligible companies, helping them expand their manufacturing facilities. It was announced today that GlobalFoundries, a chipmaker based in New York, will receive a $3.1 billion package from the […]

  • By Adnan Farooqui
  • 5 months ago
Samsung expects its 2023 profit to drop by 85% compared to last year

Samsung expects its 2023 profit to drop by 85% compared to last year

Last year was extremely challenging for Samsung, as smartphone and semiconductor chip sales were quite low. Those are the two most important product categories for Samsung. However, the company and even analysts expect this new year to be much better as sales are recovering. Today, Samsung Electronics posted its earnings guidance for the fourth quarter […]

  • By Asif Iqbal Shaik
  • 6 months ago