Samsung released its earnings guidance for Q3 2019 and predicted that its operating profit would be down 56 percent compared to the same period last year. The company today released its full earnings for the quarter.
While the profit decline might signal to some that Samsung hasn't been doing enough to stop the bleeding, it actually shows that the company's recovery strategy is working. The sharp decline is largely attributed to the slow performance of the memory chip market.
Samsung made $6.71 billion in operating profit this past quarter
Samsung made 62 trillion won $53 billion in revenue this past quarter, down 5 percent from a year ago. The company posted an operating profit of 7.78 trillion won or $6.71 billion, a 56 percent decline compared to Q3 2018. Samsung posted a record operating profit in Q3 2018, raking in over $16 billion on revenues of $58 billion.
The company began to manage expectations for the future after posting the record-breaking profit in Q3 2018. That surge was largely due to the stellar performance of the semiconductor division. The quarter saw a strong demand for both server and mobile memory products. It also highlighted the bumpy road ahead as demand for chips slowed and prices fell. We've seen that reflect in the company's balance over the past few quarters.
Earnings from the semiconductor business were down significantly in Q3 2019. That's because memory chip prices have continued to fall while demand hasn't picked up. The division also took a hit from declining prices for mobile processors. So while it made over $12 billion in operating profit for Samsung in Q3 2018, it made less than $3 billion in profit in the quarter ending September 2019.
It's not all doom and gloom for the company. Samsung has taken considerable steps over the past year to improve the earnings from its mobile division. The strategy appears to be working as the division exceeded expectations. Revenues of the mobile business came in at 29.25 trillion won or almost $25 billion, a 17 percent increase from last year. It also made 2.92 trillion won or $2.5 billion in profit, a commendable 32 percent increase from Q3 2018. Samsung attributes this to strong sales of the Galaxy Note 10 and the A series in addition to improved margins on its affordable models.
Samsung is optimistic about the rising demand for semiconductor products in 2020 but stops short of providing a detailed forecast due to uncertainties related to macroeconomic issues. The mobile division will likely see a decline in demand in the final quarter of this year due to seasonality, the Galaxy Note 10 will surely not be as hot in November as it was when it came out in August. Samsung also expects 5G and foldable smartphones to contribute more to its bottom line in the coming year.
