Samsung looks to 5G to boost its business in 2020

Samsung Galaxy Note 10+ 5G smartphones displayed at a Samsung store in Shanghai.

Alex Tai | SOPA Images | LightRocket | Getty Images

Samsung hopes next generation mobile networks, known as 5G, might provide a boost to its business.

The South Korean electronics giant has a number of businesses, from chips to smartphones, which could benefit from the increased rollout and adoption of 5G networks. 5G technology promises super-fast data speeds and the ability to better underpin key infrastructure.

On Thursday, Samsung posted net profit that fell 38% year-on-year for the fourth quarter. But the company said 5G could be a positive for some of its business units in 2020.

“Accelerating commercialization of 5G is likely to increase demand for 5G smartphones,” a Samsung executive said on its fourth-quarter earnings call on Thursday. The company plans to expand its “5G product portfolio” across a “wider range of price points.”

Elaborating on this point, an executive said that the company will release 5G-capable smartphones for more of its Galaxy A series of devices — these are its mid-to-low range smartphones. And it will continue to make its high-end phones 5G-capable.

“This will drive up global sales,” the executive said.

Samsung admitted that 5G components for 5G phones are more expensive and could bring “additional cost burdens” but said it will try to make the endeavor profitable by enhancing the “operational efficiency in all areas including manufacturing, R&D (research and development) and marketing.”

The company said that as 5G rolls out across the world and mobile carriers begin to subsidize smartphones, 5G “adoption in terms of handsets will be much larger in terms of pace of growth than we saw last year.”

5G smartphones contributed to 1% of global smartphone shipments in 2019, according to Counterpoint Research. In 2020, that share is expected to grow to 18%.

Samsung is looking for ways to boost its smartphone division. Apple overtook Samsung in terms of smartphone shipment volumes in the fourth quarter. 5G could be a way to boost shipments of phones. Samsung also confirmed on Thursday that it’s going to release a new foldable smartphone this year.

Countries around the world including the U.S., China, Japan and South Korea have begun rolling out their 5G networks. Other parts of Samsung’s business could see a benefit from the increased use of 5G. It makes chips that go into data centers as well as consumer devices like smartphones and laptops.

“We expect demand (for chips) to be solid from consumer products, especially ones driven by the construction of 5G networks in China,” a Samsung executive said.

“For the memory business, market conditions are forecast to improve gradually on the back of stronger data center demands and increasing adoption of 5G smartphones,” the executive added, while cautioning that the “actual pace of 5G expansion” will need “further monitoring.”

Meanwhile, the company also sells 5G networking equipment. Its customers include South Korea’s major mobile carriers, but it is eyeing international expansion. For 2020, it expects the domestic business to decline while international markets will pick up the slack.

“5G (networking) business to shrink Y-Y (year-on-year) at home but expand overseas as we expand our core competencies and invest in the infrastructure required for additional growth,” Samsung said in its earnings release.

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