South Korea’s outbreak is raging, samsung electronics’s “breakout plan” cast a shadow. At present, the situation in China is improving, but the rest of the world is constantly in a hurry, of which the South Korean outbreak is the most touching. As of 15:00 BST on March 4, the cumulative number of confirmed cases in South Korea reached 5,621, compared with The total population of 51.64 million in South Korea, the prevalence rate has exceeded one in 10,000, and has nearly doubled in China.
The vast majority of confirmed cases in South Korea are concentrated in Daegu and Gyeongsang North Road, while the neighboring city of Kuo,its “Silicon Valley”, known as South Korea’s “Silicon Valley”, is the largest electronics industry city in the interior of South Korea, with electronics, semiconductors, communications equipment and other complete industrial chain.
Samsung Electronics, LG Electronics, LG Display and other technology giants have set up factories and branches in the city.
The current outbreak in South Korea is endangering Samsung and LG’s factories in the city of Kuo. South Korea International Radio reported that the samsung mobile phone factory in the city of Kagosi, which had just resumed work, had again confirmed the fourth confirmed case on March 2 and was forced to stop work again, the second stoppage in a short period of time.
According to Samsung Electronics, the plant is its only smartphone production base in South Korea, with the high-end Galaxy Z Flip, Galaxy S20 production tasks, and the two flagship phones are expected to be the key to Samsung’s mobile phone business in 2020, but now the outbreak of “black swan” shadow over.
And in 2019, samsung electronics is not going well.
Recently, Samsung Electronics disclosed its 2019 financial results showing full-year revenue of 230.4 trillion won (about 134.74 billion yuan), down 5.5 percent from a year earlier, and net profit of 21.74 trillion won (about 127.1 billion yuan), down 51 percent from a year earlier. Has fallen back to 2016 earnings levels.
The sharp drop in net profit is closely linked to the fierce global competition for smartphones, display panels, semiconductors and other businesses in 2019. As of the close of trading on March 4, Samsung Electronics had a market capitalisation of 369.07 trillion won (about 216.13 billion yuan).
In its earnings report, Samsung Electronics is hoping to revive samsung electronics’ empire by 2020, but a sudden outbreak is adding to uncertainty.
Samsung phones, losing China
In September 2019, Samsung closed its last factory in mainland China, the Huizhou plant, and cut 3,000 jobs to stop production of mobile phone products in China altogether. Samsung’s smartphones, meanwhile, are losing out on the huge Chinese smartphone consumer market, with its market share in China falling to 1 per cent in 2019.
Photo credit: Electronic Engineering Album from Counterpoint
The reason why Samsung’s mobile phone has fallen in the Chinese market is not difficult to explain, first of all, the rise of local mobile phone brands, a large number of major cost-effective domestic Android smartphones, for Samsung is undoubtedly a heavy blow. Coupled with the “explosion gate” incident in 2016, Samsung’s Chinese market share has collapsed.
It’s not just the Chinese market, Samsung is losing out to Apple in the global smartphone market. In addition, the 5G era of the future of this smartphone has also been surpassed by Huawei.
In the fourth quarter of 2019, Apple shipped 73.8 million units, up 7.9 percent from a year earlier, replacing Samsung as the world’s smartphone sales champion, with a 20 percent market share, while Samsung’s global market share slipped to 18.8 percent, according to IDC.co., according to IDC.
In addition, in the 5G mobile phone market, Huawei also replaced Samsung as the world’s top 5G handset sales for the year. According to the latest Strategy Analytics report, 19 million 5G smartphones were shipped worldwide in 2019, with Huawei taking the first market share, accounting for about 37 percent, and Samsung in second place with 35.8 percent.
5G will be a must for all mobile phone manufacturers in 2020. Samsung has set a target of shipping 100m to 300m 5G handsets by 2020, leading to strong growth in the samsung smartphone business.
But the highly-anticipated flagship Galaxy S20 series suffered from Waterloo. Launched in South Korea on February 27th, only 708,000 units were sold on the first day, a drop of nearly 50 per cent compared to the 140,000 units sold in the 24 hours of the Galaxy S10 series, which claimed to be the worst flagship aircraft on sale.
In response to dismal sales data, a Samsung spokesman said discounts on new phones had fallen sharply and the number of visitors to offline stores had affected sales because of concerns about coronavirus infections.
Thus, the outbreak not only caused the smartphone factory to shut down repeatedly, but also directly affected the latest flagship computer sales, mobile phone “breakout” uncertainty is increasing.
Samsung’s most profitable business is facing its biggest test
More than just mobile phones, Samsung has been proud of its global semiconductor business, facing the biggest challenge ever in 2019: trade frictions between Japan and South Korea.
It is worth mentioning that the semiconductor business, which has traditionally been Samsung’s most profitable cash cow, has been accounting for more than 70% of the company’s net profit. But in 2019 there was a sudden cliff-breaking decline, with Samsung Semiconductor’s operating profit at 14.02 trillion won in 2019, down nearly 70 percent from 44.57 trillion won in 2018, according to earnings reports.
The main reason for Samsung’s plummeting profits is that Japan and South Korea are stuck in the neck due to trade frictions.
On July 1, 2019, Japan announced that it would strengthen export controls in South Korea, strictly scrutinise semiconductor materials and prohibit Japanese companies from exporting related products to South Korea through third countries.
The semiconductor industry is South Korea’s 20 years of efforts to cast the country’s heavy weapons, but South Korea’s semiconductor industry to mid-stream manufacturing. Upstream semiconductor core materials, precision semiconductor equipment are in japan’s hands, the Korean semiconductor industry is heavily dependent on imports of equipment and materials for Japan.
Semiconductor industry chain
In the case of high-purity hydrogen fluoride, which is a key material at the heart of etching wafer semiconductors, Japan accounts for 70 per cent of global production. In August 2019, Japan’s exports of hydrogen fluoride to South Korea were both zero in amount, and exports fell 99.4% year-on-year in September, directly causing Samsung’s semiconductor business to suffer a major blow.
Samsung plans to replace all of the more than 220 Japanese raw materials and chemicals used in semiconductor manufacturing, all of them domestic or other products, and even all of them domestically.
But most semiconductor materials, equipment technology content is very high, Samsung’s domestic replacement road, is undoubtedly quite long, and expensive.
Samsung ‘tears’ worth of research and development in the face of net profit cuts. Samsung Electronics spent a record 20.1 trillion won ($117.7 billion) on research and development for the year, according to 2019 earnings data.
At present, Japan’s export controls against South Korea have been slow, but controls remain.
At the same time, the outbreak in Japan is not optimistic, the semiconductor industry chain has more or less been affected, although export controls ease, Samsung import costs are also expected to rise, will further suppress the profitability of the semiconductor business in 2020.
Samsung panel, gradually eaten away
Another piece of Samsung’s cake in 2019: the display panel industry, and profitability is shrinking.
Samsung’s display panel division’s profit fell nearly 49 percent, while full-year operating profit fell to 1.58 trillion won (about 9.25 billion yuan), according to 2019 earnings data.
In response, Samsung explained that the production capacity of its Chinese rivals was expanding rapidly and that LCD panelprices had fallen more than expected.
Behind Samsung’s explanation is that Chinese panel companies such as Beijing Oriental, Huaxing Optoelectronics and Tianma are on the rise. BoE (00725) became the world’s largest MANUFACTURER of LCD panels in 2018 and 2019 for two consecutive years. Shipments in all five subdivisions are the world’s No.
According to market research firm IHS Markit, more than 60 percent of Samsung Electronics’ TV shipments in 2019 are based on LCD panels from China and Taiwan.
But in the more expensive OLED panel market, Samsung still dominates. In 2019, Samsung has 85.4% of the market share of the mobile AMOLED panel.
Mobile phones, semiconductors, display panels, Samsung Electronics Laughing Aojiang Lake’s three watchers, is facing fierce global market competition. At the same time, in 2020, when the beginning of the outbreak of the “black swan”, How will Samsung break out?
“The three things Koreans can’t live without in their lives are death, taxes, and Samsung. “It’s a Korean mantra. You can see the influence of the Samsung Group in South Korea.
As we all know, the biggest feature of the Korean economy is the monopoly of large consortia. Samsung, Hyundai, LG, SK, the four major Korean conglomerates, the total annual turnover of South Korea’s GDP as a percentage, once as high as 60%.
It means that the business development of the four major enterprise groups is directly related to the trend of the Korean economy.
Writing/Making: All Small View