Samsung Electronics achieved its highest quarterly performance ever in the second quarter of this year, but the Device Experience (DX) division, which oversees TVs, home appliances, and smartphones, is facing significant challenges.
Despite generating approximately 2 trillion won in sales effects from the 'National Audit Program' that ended on July 5, analysts suggest that large-scale discounts and cost pressures have made it difficult to maintain profitability.
According to industry sources on July 7, Samsung reported preliminary sales of 171 trillion won and an operating profit of 89.4 trillion won for the second quarter, both record highs. However, the performance of individual divisions will be disclosed in the final report, leading to heightened interest in the DX division's actual profitability, overshadowed by the semiconductor (DS) sector.
Many in the industry attribute this record performance primarily to the booming memory semiconductor market. With increased investments in AI servers, the profitability of DRAM, NAND, and high-bandwidth memory (HBM) has surged, while DX's aggressive sales strategies may have led to relatively lower profit margins.
A prime example is the National Audit Program, during which Samsung conducted large-scale discount promotions on key products such as TVs, refrigerators, washing machines, and smartphones. The company reported sales of about 2 trillion won during this period. While it succeeded in boosting sales volume, the increase in discount sales and marketing costs has reportedly sacrificed profitability.
Market analysts also anticipate a decline in DX profitability. The TV market continues to face aggressive pricing from Chinese competitors, and the home appliance sector has not fully resolved the burdens of raw material and logistics costs. In the smartphone segment, despite the expansion of premium products with enhanced AI features, rising marketing expenses have become a significant burden.
Particularly in the home appliance and TV sectors, while the proportion of premium products featuring AI capabilities is increasing, a slowdown in consumer sentiment necessitates continued aggressive promotions. Coupled with ongoing price competition from Chinese manufacturers, this could limit the potential for profitability improvements, leading industry experts to identify the recovery of operating profit margins as the primary challenge for DX in the second half of the year.
Moreover, Samsung's simultaneous pursuit of an AI premium strategy and large-scale discount policies presents a dilemma. Premium products featuring AI capabilities are based on high prices and profitability, but in a climate of weakened consumer sentiment, the company is compelled to engage in discount sales. Consequently, while sales volumes may increase, operating profit margins may not meet expectations.
In the securities industry, there are predictions that if the confirmed results for the DX division, to be announced at the end of this month, fall short of market expectations, there will be a stronger emphasis on a profitability recovery strategy centered on premium products rather than discount sales in the second half of the year.
The recently confirmed payment rates for the first half of the year also reflect disparities among divisions. The memory division will receive 100% of the base salary, while the MX division and Visual Display (VD) will receive 50%, and the home appliance (DA) division will receive 25%. This variance in profitability among divisions is directly reflected in performance bonuses.
An industry insider stated, "For DX, the focus has shifted from how much AI functionality can be integrated to how much profit can be retained. While semiconductors have driven performance, home appliances and mobile are now faced with the new challenge of recovering profitability."
* This article has been translated by AI.
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