Samsung, LG fare well in first quarter but future looks grim

Boasting an artificial intelligence-powered camera with a 100-times zoom lens, Samsung's latest smartphone was said to be a revolutionary game changer.

But domestic sales of the Galaxy S20 Ultra as well as of two other models in the same series have been lacklustre, reaching only 60 per cent of their predecessors' sales according to initial figures.

To be sure, the phones were launched amid a massive coronavirus outbreak in the country, which kept consumers away.

The pandemic has hit sales of mobile devices across the board.

The global shipment of smartphones fell by 17 per cent year on year in the first quarter of this year to reach 275 million units - the worst quarterly performance of all time, according to market research firm Strategy Analytics.

Experts warn that the rest of the year will be worse as the virus, which has infected more than four million people worldwide, batters the global economy.

Samsung Electronics has been hit but remains the world's top smartphone maker with a 21 per cent global market share.

In fact, its first-quarter operating income rose 3.43 per cent year on year to 6.4 trillion won ($7.4 billion), although net profit dropped 3.15 per cent to 4.8 trillion won.

Its semiconductor business performed better than expected on strong demand for memory chips for computers and servers, as more people work or study from home because of the pandemic and spend more time online.

A Samsung spokesman also credited the "solid sales trend" of its second foldable phone - the new Galaxy Z Flip, which is "highly acclaimed among millennials and female customers because of its stylish and compact design".

While the outbreak has shuttered many small businesses, conglomerates behind household names such as Samsung, LG and Hyundai fared reasonably well in the first quarter, some by a stroke of luck and others because they adjusted their business models.

LG Electronics, for one, experienced a boom in sales of high-end home appliances as concerns over household hygiene grew.

The company's first-quarter operating profit broke the one trillion won mark for the third time in history, reaching 1.09 trillion won, up 21.1 per cent year on year.

A spokesman told The Straits Times that products with steam function, such as dishwashers, dryers and the LG Styler, which steams clothing in a closet, saw a rise in demand during the outbreak.

"We've never said our steam products can kill the coronavirus, but they do clean, sanitise and kill germs, and people are making the connection themselves," he added.

South Korea has managed to flatten its infection curve in two months, with the total tally passing 10,870 yesterday. But the damage has already been done.

Airlines suffered as demand for air travel ground to a halt, while shopping malls saw a drastic drop in sales as people stayed home.

Retail giant Lotte Shopping is now planning to close 200 out of its 700 outlets after recording an 83.6 per cent year-on-year net loss of 853.6 billion won last year.

It is shifting its focus online, unveiling an integrated e-commerce app called Lotte On last month.

The company hopes to generate 20 trillion won in sales through the app by 2023 - up from 11 trillion won of online sales last year.

Hyundai Motor had to suspend operations at most of its overseas plants because of a lack of demand amid the outbreak, and the company is planning to use its idle factory space to manufacture much-needed face masks for distribution to its employees worldwide.

Still, Hyundai's first-quarter revenue rose 5.6 per cent on year to 25.3 trillion won, although net profit plunged 42.1 per cent.

Beauty giant Amorepacific, which owns popular brands such as Innisfree and Etude House, was badly hit. Its first-quarter net income plunged 41.9 per cent over the previous year, while net profit fell 66.8 per cent.

One beauty category, however, outperformed the rest - "wash off" products that include facial cleansers and body wash.

Amorepacific told The Straits Times that online sales of its facial cleansers alone spiked 690 per cent in March compared with January, because of the frequent use of face masks during the outbreak.

It is also rolling out new hand sanitisers such as the Modi Spa Clean Hand Sanitiser Gel, which promises to kill 99.9 per cent of bacteria and viruses while hydrating the skin.

DBS Group Research economist Ma Tieying said South Korea has done well in containing the outbreak and expects a rebound in consumption and domestic demand in the second quarter.

But the economy may still contract 1 per cent because of "external demand shock surfacing due to global lockdown". "More pressure on exports and export-oriented companies including Samsung and Hyundai is expected for the next two to three quarters," she said.

Samsung said it is closely collaborating with key partners to minimise the impact of the pandemic.

"We will keep monitoring the situation and... respond quickly and flexibly to new developments," said a spokesman.

DBS Group Research economist Ma Tieying said South Korea has done well in containing the outbreak and expects a rebound in consumption and domestic demand in the second quarter. But the economy may still contract 1 per cent because of "external demand shock surfacing due to global lockdown".