Samsung’s smartphone sales drop in Q4 puts pressure on upcoming Galaxy S9 and S9+

For a company that’s seen a fair bit of turmoil over the last couple of years, Samsung reported relatively strong earnings today, largely thanks to its surging chip business. Fortunately for Samsung, that strength overcame a mobile handset business that remains in transition.

With less than a month to go before Samsung unveils its new flagship phones, the earnings numbers are a reminder of just how much Samsung’s mobile business has riding on sales of the new Galaxy S9 and S9+, which are not expected to be radically different from last year’s S8 and S8+.

In the company’s Q4 earnings release today, Samsung Electronics reported record results for the third straight quarter. Given a disastrous recall of exploding Galaxy Notes in 2016 and a scandal that saw Samsung’s leader sentenced to five years in jail last year, that’s somewhat remarkable. Samsung said its profits were up 42 percent from the previous year, and revenue rose 23.7 percent.

However, while Samsung did not provide specific numbers, the company noted that “total smartphone shipments decreased, due to the lineup optimization of low-end models, while shipments of flagship products, such as the Galaxy Note 8, increased from the previous quarter.”

In other words, Samsung has traditionally been focused on market share, selling a wide range of smartphones. But it’s been winnowing that lineup, particularly after a couple of rough years that saw it blown out of markets like China by tough local competition.

Instead it is (once again) trying to follow Apple’s lead and focus more on premium phones with features that set them apart. Thus, increased sales of the flagship S8 are good news, even if it’s not enough to offset the overall drop in lower-end smartphones.

But if Samsung wants to lean harder on its flagship phones, the upcoming announcement of the Galaxy S9 and S9+ takes on greater significance.

In spite of leaks suggesting the S9 and S9+ will be fairly close to their predecessors, Samsung is optimistic that the new phones will boost earnings.

“In the first quarter, the company expects the mobile business to improve its earnings, led by an increase in sales of flagship products with the launch of Galaxy S9,” the company said in its earnings report.

And it emphasized that going forward, “Samsung will continue its efforts to differentiate its smartphones by adopting  cutting-edge technologies, such as foldable OLED displays.”

Samsung also said that demand for smartphones is expected to rise this year “thanks to growing replacement demand for premium smartphones.”

The company certainly has its fans. We’ll soon see if that loyalty will be enough to move the new Galaxy phones in sufficient numbers to boost Samsung’s current smartphone strategy.