Mobile business revenue under pressure, LG and Samsung compete for high-end TV profits

High-end TVs have brought a warm touch to the performance of the two Korean giants, and have also become a battlefield for the two companies to compete for supremacy. Recently, Samsung and LG both released their first quarter reports. Samsung's operating profit reached 8.49 trillion won (about 8.2 billion US dollars), which was a year-on-year decrease of 3.31%, but a month-on-month increase of 2.14%. LG Electronics' operating profit increased by 44% year-on-year. Unlike Japanese companies, which are dwarfed by them, not only smartphones contribute , but the TV business is also a significant plus for the two companies. In fact, competition in the mobile field is becoming increasingly fierce, and ultra- high-definition high-end TVs are becoming increasingly important to the two companies. At present, the two companies have even launched a price war in the ultra-high-definition TV market to compete for their status in the arena.

Benefiting from high-end TV business

LG Electronics' first-quarter performance was better than market expectations, and it achieved its strongest quarter in two years, with operating profit up 44% year-on-year to 504 billion won (about 486.89 million U.S. dollars). LG Electronics, currently the world's second-largest TV manufacturer, said that the hot sales of large-screen TVs and the reduction of material costs drove the growth of profits in the first quarter, and the revenue of the TV business will continue to grow in the second quarter.

Samsung Electronics' sales for the quarter reached 53.68 trillion won, up 1.53% year-on-year and down 9.45% month-on-month; net profit was 7.57 trillion won, up 5.86% year-on-year and up 3.74% month-on-month. Analysts at IBK Securities in South Korea pointed out that Samsung Electronics' performance for the quarter was better than expected, partly due to the growth in demand for cheap Galaxy devices, and partly due to the increase in TV sales driven by this year's World Cup in Brazil.

Although color TVs are facing weak sales and have even become a long-term loss burden for some Japanese companies, Korean companies are obviously in a different situation. In the first quarter, LG Electronics' TV business profit was 240 billion won, higher than 11 billion won in the same period last year. By strengthening the sales of high-end products, such as ultra-high-definition resolution TVs, LG Electronics is trying to solve the problem of weak demand for TVs. Samsung, on the other hand, is implementing the strategy of flooding the market with products in the field of TVs. A relevant person in charge of Samsung China told reporters that Samsung has more than 30 UHD products in China, including both high-end products and high-volume models. It is expected that the performance boost of UHD high-end TVs will be more obvious in the second quarter. At present, Samsung has won the global TV market sales for eight consecutive years.

LG and Samsung are both pushing UHD this year. According to Korean media reports, Samsung Electronics and LG Electronics are involved in a UHD TV price war in order to compete for the top growth position in the rapidly growing UHD TV market. At the end of April, LG began selling its 49-inch UHD TV at a price of 2.9 million won. In response, Samsung Electronics launched a 40-inch UHD TV model priced at 1.89 million won (about 11,500 yuan). This is also the first time that Samsung Electronics has launched an UHD TV product with a price starting with "1". A relevant person in charge of Samsung China said that the pricing of UHD products this year is not very high. For example, the UHD 55-inch curved TV is at the same level as last year's smart TV of the same size .

Mobile business faces challenges

As electronics companies that operate on multiple fronts, Samsung and LG have different performances in their product lines, but mobile phones are undoubtedly one of the highlights. LG's MC (Mobile Communications) division, which is responsible for the smartphone business, had sales of 3.407 trillion won in the first quarter and an operating loss of 8.8 billion won. The division has suffered losses for three consecutive quarters, but the losses in the third and fourth quarters of last year were 79.7 billion won and 43.4 billion won respectively, and the losses in the first quarter of this year have been greatly reduced. The operating profit of another giant, Samsung Electronics' mobile division, fell from 6.51 trillion won in the first quarter of last year to 6.43 trillion won in the first quarter of this year. In the fourth quarter of 2013, the mobile division's operating profit was 5.47 trillion won. The operating profit margin of Samsung Electronics' mobile division remained the same as the same period last year, still maintaining at 19.8%. However, most analysts believe that the operating profit margin of this division will decline at the end of the year.

Samsung makes most of its profits from mobile devices, but fierce market competition has made it harder to maintain its dominant position. Samsung produced 89 million mobile phones in the first quarter of this year, still ranking first among all mobile phone manufacturers. However, Samsung's market share fell from 32% last year to 31% in the first quarter of this year, which is the first time its market share has fallen since the fourth quarter of 2009. Neil Mawston, executive director of market organization Strategy Analytics, said: "Samsung will face pressure from Apple (594.41, -6.55, -1.09%) in high-end mobile phones, and will face challenges from mobile phone brands such as Huawei in mid- and low-end mobile phones ."

Samsung Electronics is reportedly trying to lower the price of its latest smartphone, the Galaxy S5, which was launched globally earlier this month. However, the escalating price war caused by intensified competition may put pressure on the profits of high-end smartphones throughout the year. Market research firm Bernstein Research predicts that the proportion of Samsung Electronics' mobile phones priced below $200 will increase from 45% last year to 51% this year. At the same time, the proportion of Samsung Electronics' high-end smartphones priced above $450 will drop to 29% this year.

South Korea's KB Securities Investment Company pointed out in its latest research report that as competition in the smartphone market gradually intensifies, if the cost of spare parts is too high while competing with competitors in a price war, it is likely to drag down the Korean electronics giant's full-year profits, and it will be particularly important to cut costs appropriately.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.