How Does Samsung Make Money

Samsung Electronics is one of the world’s largest manufacturers of consumer electronics and components.
The company produces devices, information technology, mobile communications, and consumer electronics. Based on net revenue, the information technology and mobile communications segment is Samsung’s largest business division.

However, the company’s 2021 sales were highest in the Device solutions area.

In this study, we discuss Samsung’s business model, its performance in recent years, and what to expect in the future.

Samsung provides solutions to the retail, hospitality, healthcare, finance, education, transportation, and government industries. The company’s operations span several continents, including the Americas, Europe, Africa, the Middle East, and Asia-Pacific. The head office of Samsung is in Seoul, South Korea.

Samsung Business Segments Analyzed

The company revenue stream is divided into 3 divisions based on product category, each with multiple business segments. Below you can find the graphical representation of how Samsung’s business segments are divided:

• The Consumer electronics segment is represented by regular electronics that, were in high demand, driven by the pandemic-related interest in TVs, smart wearables, and headphones. However, Samsung continues to face increasing competition from China, particularly in the smartphone market.
• IT and mobile communications are represented by mobile devices and communication services. Mobile networks and communications, at Samsung are the company’s goal for creating a complete product portfolio for 5G commercial services. In the previous year, they spent more than $100M on advertising across digital, print, and national TV. A global mobile communication service from Samsung is ChatON which works on all major smartphone and feature phone platforms.
• Device Solutions is the segment represented by semiconductors and displays. Since 1993, they have supplied the global memory semiconductor market and contributed to the growth of the entire global IT market.

Now that we went through each segment, let’s break down how Samsung makes money from each of them in a short yet comprehensive analysis:

How Samsung makes Money from Consumer Electronics?

The growth of Samsung’s consumer electronics revenue overall is based on sales of TVs and other products. The projections for its TV revenue were made using its shipping data and ASP increase. Additionally, this is weighted average market growth rates for the markets for refrigerators, monitors, washing machines, and air conditioners to base the growth of its other consumer electronics revenue.

Samsung also gained significantly from its semiconductor and memory business, which is expected to increase at the fastest rate in 2021 thanks to the demand for PCs, gaming laptops, and newly released 5G products, such as smartphones, on a global scale. The pandemic-related increase in consumer expenditure on electronics and appliances was particularly noticeable for Samsung TVs, iPads, and smart wearables.

The rapidly expanding headphone market, particularly TWS earbuds, helped Samsung expand its portable electronics business. Samsung increased its market share in this category, especially in European markets, thanks to the 2017 acquisition of Harman and its brand JBL.

According to Samsung market revenue, this is a weighted average projected CAGR for the market segments for refrigerators, monitors, washing machines, and air conditioners.

How Samsung makes Money from Information Technology and Mobile Communications?

The IT and Mobile Communications income for Samsung Electronics in 2021 was $766,715M. This was an increase from the lowest recorded value during the survey period from 2020. As we can see, 2019 had a more favorable profit compared to 2020.

But in 2020, the income dropped considerably due to the pandemic, the market was sceptical about buying these products because of the financial crisis generated by COVID-19. Later in 2021 when the pandemic calmed down, sales exploded. People were eager and missed shopping, therefore incomes increased.

How Samsung makes Money from Device Solutions?

The peak revenue of Samsung Electronics Device Solutions (Semiconductor & Display) in 2021 were $2.1B according to The Zippia.

Overall, it is expected that the company’s semiconductor business will continue to expand rapidly in 2022, powered by its DRAM and NAND business segments, which are expected to rise by 26.4% and 34.1%, respectively, as the market leader in each of these markets.

Additionally, the company’s foundry segment could expand by 17.5% in 2022 as a result of increased output and rumoured pricing rises. Last but not least, we predict that its display panel will continue to expand steadily in 2022 thanks to its substantial exposure to the smartphone display industry, where it continues to dominate the market and advance OLED technology.

Samsung Total Revenue and Profit 2019–2021

In 2021, the company’s revenue was $240.71B, an increase over the previous year’s revenue of $203.43B. The revenue of a company is the entire amount of income generated by the selling of goods or services. Unlike earnings, no expenses are deducted.

The second half of 2020 has seen a turnaround for Samsung after its profits declined in 2019. In 2021, South Korean tech behemoth Samsung Electronics reported third-quarter earnings of more than $13B.

In comparison to the same quarter last year, this indicates that profits increased by more than 19% and strong consumer demand was the primary driver of higher profits.

According to Samsung, the increasing tendency was particularly strong for microchips and consumer goods. Due to consumers delaying purchases, the smartphone market, which is particularly vital to Samsung, lagged during the whole of 2019.

Demand increased in 2020 and 2021 as a result of new foldable devices and 5G Devices.
As the demand for microchips and other electronics increased because of the coronavirus pandemic, the semiconductor industry, which accounts for more than 80% of the company’s profits together with phones, recovered.

Stats and Facts about Samsung

• Samsung began to sell noodles and other products, but it wasn’t until 1970 that the company sold its first electrical product, a 12-inch black-and-white television.
• Samsung logo change over the years:

• Samsung is a global employer, in over 79 countries with more than 236,000 employees.
• Samsung is always at the leading edge of technology. In 1998, they invented the digital TV, in 1999, the Watch phone and the MP3 phone, and the 3D home theatre in 2010, and in 2013, they invented the world’s first curved smartphone display.
• After the Samsung S3 was released, sales at one point exceeded 500 devices per minute.
• The founder of Samsung, Lee Byung-Chull, chose the name Samsung, which in Korean means “three stars”, because he visualized his company as being as everlasting as the stars.
• Other than phones, Samsung the Korean behemoth also produces tanks, amphibious assault vehicles, howitzers and other war machines.
  (Source: https://www.thefactsite.com/samsung-facts/)
• Lee Kun-Hee (a South Korean business magnate who served as the chairman of Samsung Group) was found guilty in 1996 of bribing former president Roh Tae-Woo. He was sentenced to two years in prison, a verdict that the judge commuted, and was amnestied in 1997.
  (Source: https://www.britannica.com/topic/Samsung-Electronics)

Conclusion

Samsung has a variety of revenue sources from both technology and consumer discretionary.

However, Samsung warned of a massive challenge in its business outlook, copying global macro risks such as inflation and the Russia-Ukraine war as examples.

Consumers and business clients are reducing their spending to prepare for a possible recession while rising interest rates and costs are directly affecting their disposable income.

Financial records in 2022 are expected to be lower. Although we are on the brink of an economic crisis, even so, Samsung is trying to invest in the quality of its products and brings innovations to the market that it enjoys.