Sales of Samsung Electronics’ network business in the first half of 2020 will be 70% of what it was a year ago, people familiar with the matter said on Monday.
This is due to the COVID-19 pandemic that delayed 5G investment plans of telcos, they said, with South Korean telcos postponing their 5G investment plans were especially hurtful.
The business won’t fair any better in the third quarter but will began recovering orders in the fourth quarter, they said. Samsung Network is expected to post revenues of around 4 trillion won for the whole year __ around a billion dollar less than is record sales of 5 trillion made in 2019.
Before the pandemic, the business internally expected a sales increase of 4%, the people added.
The lower-than-expected sales is also expected to impact profitability. Samsung Network is expected to have marked an operating margin rate of 16% last year __ double the rate of 8.6% made by its parent business IT & Mobile (IM).
Samsung’s IM business posted 107.27 trillion won ins sales and 9.27 trillion won in operating profits last year. The mobile business contributed 102.33 trillion won of sales.
The South Korean tech giant’s operating margin rate as a whole was 12.1% last year. Only the semiconductor business, which had rate of 21.6%, was higher than the network business in operating margin rate. Samsung’s consumer electronics business had a rate of 5.8% and the display unit 3.2%.
Samsung Network’s profitability will also be impacted by South Korean telcos taking more control over their optical transceiver supplies. SK Telecom is buying them on its own rather than using equipment vendors as middlemen. KT is designating optical transceiver companies for its network equipment suppliers.