It is expected that Samsung Electronics’ Network Business Department will achieve its biggest annual sales this year. Out of Samsung Electronics’ entire businesses, its growth rate in sales is the highest. It is likely that it has been benefitting from the 5G network market and sanctions on Huawei by the U.S. Government. Because number of demands for equipment for 5G network continues to grow, it is likely that it will have another great year next year.
According to the industry and stock firms, it is estimated that Samsung Electronics’ Network Business Department will make $5.27 billion (6.256 trillion KRW) in annual sales this year. Samsung Electronics does not announce the amount of sales of its individual business department. The amount of sales of Network Business Department is estimated by subtracting the amount of sales of Wireless Business Department from the amount of sales of IM (IT and Mobile) Division.
Although Samsung Electronics made an estimation during a conference recently held for institutional investors in London that its Network Business Department would make around $4.22 billion (5 trillion KRW) in annual sales this year, the industry is estimating higher number. In 2018, Network Business Department made around $3.52 billion (4.17 trillion KRW) in annual sales. Basically, the industry is estimating that Network Business Department’s annual sales in 2019 will be 50% higher than its annual sales in 2018.
The industry believes that Network Business Department has had a successful year due to its strategy to gain an edge within the 5G telecom equipment market. As the market has grown within South Korea and the U.S. this year, there have been increased demands for 5G telecom equipment and network solutions. Samsung Electronics has strengthened its 5G telecom equipment business after setting a goal of gaining a competitive edge in the market before 5G network was commercialized. Because Samsung Electronics was late on dealing with the 4G telecom equipment market, it has decided to make a quick decision on the 5G telecom equipment market.
Sanctions on Huawei by the U.S. Government have also acted as a favorable factor for Samsung Electronics. As Huawei, which is the world’s biggest telecom equipment manufacturer, has been excluded from supplying its 5G telecom equipment due to U.S. sanctions, there have been more opportunities for Samsung Electronics.
Samsung Electronics has seen its market shares within the 5G telecom equipment market grow tremendously this year. According to an IT market research company called Dell’Oro, Samsung Electronics currently owns 37% of the market shares and is currently ranked in first place.
“Out of Samsung Electronics’ entire businesses, growth rate of its Network Business Department’s sales compared to last year’s sales is the one that is most noticeable.” said Park Kang-ho who is a researcher from Daishin Securities. “Because number of demands for 5G telecom equipment will continue to grow globally for some time, future is very bright for Network Business Department.”
The industry is estimating that the amount of sales from 5G telecom equipment is responsible for 35% of Network Business Department’s entire sales. Profit rate is the highest for 5G telecom equipment as it is generally an expensive equipment. Network Business Department has been making steady sales in developing countries such as India by being a sole supplier of 4G telecom equipment.
Number of executives of Network Business Department has also increased by 30% in just a year. Considering how numbers of executives of other departments have remained the same or have been reduced, an increase in the number of executives is a rare sight. It is estimated that number of employees has also increased greatly due to an increase in the number of executives.
Forecast is even brighter in 2019. There have been investments into NSA-related (combination of Non-Standalone-LTE and 5G) equipment with sub-6GHz low frequency band within the industry this year. In 2019, commercialization of standalone (SA-5G) that uses high frequency band (28GHz) is scheduled.
Because 5G telecom equipment that uses high frequency bands has high added value, it is expected that Network Business Department’s sales will see another huge jump in 2020. The industry is estimating that Network Business Department will make around $8.43 billion (10 trillion KRW) in sales in 2020.
Samsung Electronics is currently facing an annual personnel change and restructuring at the end of this year. Network Business Department is expecting ‘a promotion party’ based on its outstanding performance for a change.
“Samsung Electronics is leading innovations of next-generation telecommunications and 5G mobile network through development of innovative and proactive technologies.” said a representative for Samsung Electronics. “We are going to secure solutions for building various communications networks that can implement our visions for 5G era.”
Staff Reporter Park, Sora | srpark@etnews.com & Staff Reporter Park, Jungeun | jepark@etnews.com