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Report: Samsung's growth to slow down next year

Investors believe that Samsung won't be able to maintain double-digit profit growth in 2018, despite a massive 61% increase in 2017.

Published onApril 13, 2017

Because of the exploding Galaxy Note 7, business wasn’t really that great for Samsung in 2016. Things will be quite different this year, as the company is expecting to generate an operating profit of 9.9 trillion won or around $8.7 billion in the first quarter of the year alone. This would represent the second highest quarterly operating profit posted by the tech giant in its history.

In fact, in 2017, the company’s operating profit is expected to increase by 61 percent when compared with the year before. Despite the bright predictions, investors are very skeptical regarding Samsung’s long-term growth potential and think that it might not be able to maintain a double-digit profit growth in the near future.

According to the Thomson Reuters survey, market analysts believe that the company will increase its profit by only 5.5 percent next year. The reason for this is that Samsung will bring in a ton of one-time-only money in 2017 as a result of the booming memory chip market. Because of the increased demand for DRAM and NAND chips, prices have been going up, which is why the memory industry will generate 32 percent more money this year than in 2016.

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But that will soon change. Next year, the production capacity of memory chips worldwide is expected to increase, which will bring the prices down quite a bit. Therefore, the industry’s revenues will only increase by 3 percent next year.

If Samsung wants to maintain its growth, it will have to increase sales of its other products, including smartphones. So far, things are moving in the right direction. Despite the Galaxy Note 7 fiasco that has damaged the company’s reputation, the Galaxy S8 and S8 Plus are doing extremely well with a new pre-order target of one million units set.

In South Korea, the flagship devices received 550,000 pre-orders in just the first two days and that number has now risen to almost three-quarters of a million with a week to go. The S8 series is selling a lot better than their predecessors, which received just 100,000 pre-orders in the same two-day time period last year.

The story is very similar in the US. Samsung has announced that the number of Galaxy S8 and S8 Plus pre-orders in the country is a lot higher when compared with those of the Galaxy S7 and S7 Edge. The exact numbers weren’t mentioned, but the company did say that the rise in demand is in double digits.

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