Echo: Huawei spies and Samsung crisis?

The last issue was compared with Spillikins. Flattering, of course, but far from the truth. Previously, such notes were published under the heading "Mixture". This year I decided to split. "Mixture" will be an entertaining format, "Echo" will be more serious.

Content

Short line

About Apple

I didn't know when the previous release came out that Apple had integrated iTunes and AirPlay 2 into third party smart TVs. The decision is unexpected, but expected. Expected, since Apple and Amazon announced a partnership in early December: Alexa's Amazon Echo speaker got access to Apple Music (HomePod no longer benefits). It is logical that the next step should have been in the field of video. But surprisingly, it's so fast. I thought they would tell at WWDC in the summer. After all, these two agreements in Cupertino, in fact, sentenced the HomePod column and Apple TV. And if the column never took off, then the TV set-top box was quite an independent category with its own features.

This decision suggests that Apple is betting on the content of its current and future services (there are already rumors that the company is planning a video service like Netflix). And the thing about video services with their own content is that they need a very large customer base to be profitable, so Apple is looking for access to audiences outside of its ecosystem. Learn more about streaming services here:

About Tesla

Last week, Gigafactory 1 was opened in China in partnership with Panasonic. This is a factory for the production of batteries for electric vehicles. Typically, automakers buy batteries on the side, and participate in development as much as possible. Tesla will have its own production.

Echo: Huawei spies and the Samsung crisis?

Firstly, now the company will not have supply disruptions. Secondly, the plant has already become the largest in the world (total annual capacity is 20 gigawatts, and it is planned to increase to 35 GW) and promises a better price per kilowatt in a battery than the current market leader LG - $111 against $148. This means that Tesla will be able to sell batteries. There is already a shortage on the market, and here the free capacity is also lower and the price is lower.

Huawei and Spies

In Poland, authorities have arrested Weijing Wang, Huawei's local director of B2G sales. And this is very bad.

Echo: Huawei spies and the Samsung crisis?

Since 2012, the United States has accused Huawei of espionage. However, all these years, Huawei has not given reason to doubt itself. And one of the main evidence of innocence was the lack of evidence. Huawei has never been seen in spy scandals and withstood attacks with honor. One can recall, for example, an article in Bloomberg about spy microchips, which remained without evidence.

And now such a puncture out of the blue. There was a precedent. I don't like the story, it looks strange and raises questions.

It is said that Weijing Wang, who took the Polish name Stanislav, was widely known in the narrow circles of the Polish telecommunications business and knew everyone he needed to know. Weijing Wang was an attaché at the embassy, ​​and then became first a PR director at Huawei, and then a sales director. All this is in the B2G sector, that is, supplies to the state, so the transition from PR to sales is possible, because in B2G everything is more PR than sales. B2G is an area where supervision is especially thorough. Since 2011, Wang has been working at Huawei, before that he was an attaché for 4 years. And it is strange that they arrested only now. Was there really no supervision of the former attaché before? The position is not the most common, and the transition to another job is also not commonplace.

I have no illusions that if the party asks, Huawei will answer: “Yes!” Frankly speaking, any company in any country, to which the fatherland will turn in difficult times, will do so. But this particular story is too absurd. The question arises, who benefits if Huawei is caught red-handed?

About results statements and the stock market

In addition to Apple, Samsung warned about the decline in profits, followed by LG. In general, such statements are not typical for both companies. But the idea is simple. All companies are public, therefore, one way or another, they worry about the value of shares. And one of the characteristics of the stock market is that it is subject to investor sentiment, not real events. The best example is Elon Musk's ill-fated $420 Tesla share buyback tweet.

Echo: Huawei spies and the Samsung crisis?

After all, why are investors so angry with him and dragged him through the courts? Investment funds "play" not only to increase, but also to decrease. Entire floors are occupied by offices with analysts who are along > across comb through all available information. They create analytical reports, and then throw them into the media field through the media and social networks (usually a link on Twitter) and watch the reaction. The Valeant Pharmaceuticals scandal is widely known. An information attack (of course, on the case!) On it by funds specializing in short play was carried out for almost 2 years. As a result, they "pushed through" to the point that the shares fell in price by 90%, and the company itself was forced to change its name. Now it's Bausch Health.

And "shorting" Tesla is generally one of the favorite pastimes of investors. Doing this is easy and simple, which is why there are so many notes about “jambs” in management, quality problems, etc. However, investment funds also have protection against losses, that is, instructions that if the value of shares goes beyond the established limits, then they must be bought or sold. Accordingly, Musk's tweet led to a jump in the rate, "stop losses" worked, and the funds suffered losses.

So, by reporting in advance that the results will be lower than expected, companies accustom investors to this idea. At the moment, the share price will fall, but the market will quickly win back the lost time, and when the official reports are released, this will no longer affect the share price, and if the numbers are at least a little better than previously announced, then the shares can grow even more. It is for this reason that, seeing the discrepancy between the plan and the fact, companies tend to lay straws. It must be understood that the situation is not particularly unique. Usually, “lured” analysts are used for this, who issue notes that such and such a company, according to such and such estimates, is planning to reduce profits. In this case, the fall is too severe, so Samsung had to take matters into its own hands.

Samsung Falls

Company structure

Samsung expects a 29% drop in operating profit. However, before talking about the reasons, let's take two steps aside. It seems that not everyone understands what the business of Samsung Electronics consists of. By the way, pay attention to the title. This is not about the entire Samsung chaebol, which is “a businessman and banker, owner of factories, newspapers, steamships,” but about an electronics company. Usually, when we say Samsung, we mean Samsung Electronics, whose business is based on 3 pillars and 1 support:

  • Harman (support) - audio, bought recently, brings little, we will not talk about them further;
  • CE - Consumer Electronics (excluding printers) - consumer electronics, VD, Visual Display plays a leading role in it, these are TVs;
  • IM - IT & Mobile communications - this just includes mobile phones and brings 99% of the revenue from the entire subgroup;
  • DS - Device Solutions, these are components, the division can be divided into two parts:
    - Semiconductor - semiconductors, 90% of which are sales of DRAM memory
    - DP - Display Panel - screens.

For example, this is how the revenue contribution of each division for 2017 looks like. The year is not important, the schedule is rather to understand the structure of the business.

Echo: Huawei spies and the Samsung crisis?

As you can see, the main revenue (82%) comes from the production of phones and components (memory, other semiconductors and screens). And here is what the breakdown by operating profit looks like:

Echo: Huawei spies and the Samsung crisis?

Judging by this graph, it is easy to assume that Samsung's main business is the production of components, or rather, memory. And there is something in this, since for the last almost two years it was DRAM sales that allowed Samsung to make financial records. In the graph below, the green line (DS) is semiconductors and screens, and the blue line is mobile phones.

Echo: Huawei spies and the Samsung crisis?

Q3 2016 is the write-off of the Galaxy Note 7. Putting aside this blemish, mobile phone operating income has been in the 2 to 4 trillion won range since 2015.

Causes of the crash

The Jan. 8 notice that there will be a 28.71% decline in profits refers specifically to semiconductors, and specifically to memory.

There are several reasons for this. First, it's still the same macroeconomic downturn in the field of mobile electronics. You can read this paragraph from the last issue about the slowdown in the Chinese economy:

Samsung's decline statement shows that not only China, but the whole world is "slipping". China is a big market, but it alone wouldn't be able to drop Samsung's sales like that. Here you need to understand the fact that Samsung is the leader in the memory market. Everything is purchased from him: from mobile phone manufacturers to data centers. If you need a good memory, then you go to Samsung.

Secondly, notice how the memory shot out in Q3 2018 on the graph. Space growth. Many bought for the future, and sales of phones fell apart.

Thirdly, computer scientists and data centers have also reduced purchases. Data centers grew by leaps and bounds during the cryptocurrency fever. Thanks to this, sales of video cards grew, but, in addition to graphics, other components are also needed, so Samsung also grew steadily. Now it is becoming unprofitable to mine bitcoins, and the miners have cooled their ardor. Regrets about this have already been heard in the reports of Nvidia, which produced graphics with a margin of almost 2 years in advance.

Samsung everything?

Short answer: of course not. Like Apple, Samsung is generally doing well too. The company stands firmly on its feet. It makes money by selling phones and supplying components that everyone from obscure Chinese companies to Apple buys (it's no secret that the iPhone has both the memory and the screen from Samsung). Accordingly, speaking about Samsung Electronics as a whole, it is important to understand the following principle: the market grows - profit grows, the market falls - profit falls. This is so because the three remaining divisions will not outweigh the semiconductor drawdown. The situation is clearly visible in the chart below. Q4 2018 is given as the official forecast from Samsung.

Echo: Huawei spies and the Samsung crisis?

A one-third decrease in profits means a return to the level of Q1 2017, that is, the moment when the bitcoin bubble just started to inflate. Accordingly, the protracted breakthrough of semiconductors into space is explained by traction in the market and a fortunate combination of circumstances, when Samsung was in an advantageous position: the market was not ready for an increase in demand for memory. Accordingly, under the influence of the market, other manufacturers also expanded production, and demand stalled. Now we have to wait for the next growth cycle.

I really like the word that is used in the Western press in relation to Samsung. They call him bellwether. This is a leader ram with a bell at the head of the herd.

As long as Samsung is such a ram, the company is doing well. You need to worry if a lot of new component manufacturers suddenly appear on the market, offering something better or cheaper.

Echo: Huawei spies and the Samsung crisis?

If Samsung and Apple are doing well, who is doing poorly?

LG is bad, but HTC is bad - put out the lights in general. However, LG will always be in business, as it is a huge conglomerate (like Samsung) that has all the other divisions profitable, and they are already used to LG Mobile not making money. But what about HTC is a big question, which will be covered in a separate article in the near future.

Instead of a conclusion

There should have been one more paragraph dedicated to comments in the text. But the editors said that there would be no benefit: they would not understand, they would only be offended. I agreed, but still I urge you not to hang labels, look at the world more broadly, first think, and then speak and do.

Echo: Huawei spies and Samsung crisis?

The last issue was compared with Spillikins. Flattering, of course, but far from the truth. Previously, such notes were published under the heading "Mixture". This year I decided to split. "Mixture" will be an entertaining format, "Echo" will be more serious.

Content

Short line

About Apple

I didn't know when the previous release came out that Apple had integrated iTunes and AirPlay 2 into third party smart TVs. The decision is unexpected, but expected. Expected, since Apple and Amazon announced a partnership in early December: Alexa's Amazon Echo speaker got access to Apple Music (HomePod no longer benefits). It is logical that the next step should have been in the field of video. But surprisingly, it's so fast. I thought they would tell at WWDC in the summer. After all, these two agreements in Cupertino, in fact, sentenced the HomePod column and Apple TV. And if the column never took off, then the TV set-top box was quite an independent category with its own features.

This decision suggests that Apple is betting on the content of its current and future services (there are already rumors that the company is planning a video service like Netflix). And the thing about video services with their own content is that they need a very large customer base to be profitable, so Apple is looking for access to audiences outside of its ecosystem. Learn more about streaming services here:

About Tesla

Last week, Gigafactory 1 was opened in China in partnership with Panasonic. This is a factory for the production of batteries for electric vehicles. Typically, automakers buy batteries on the side, and participate in development as much as possible. Tesla will have its own production.

Echo: Huawei spies and the Samsung crisis?

Firstly, now the company will not have supply disruptions. Secondly, the plant has already become the largest in the world (total annual capacity is 20 gigawatts, and it is planned to increase to 35 GW) and promises a better price per kilowatt in a battery than the current market leader LG - $111 against $148. This means that Tesla will be able to sell batteries. There is already a shortage on the market, and here the free capacity is also lower and the price is lower.

Huawei and Spies

In Poland, authorities have arrested Weijing Wang, Huawei's local director of B2G sales. And this is very bad.

Echo: Huawei spies and the Samsung crisis?

Since 2012, the United States has accused Huawei of espionage. However, all these years, Huawei has not given reason to doubt itself. And one of the main evidence of innocence was the lack of evidence. Huawei has never been seen in spy scandals and withstood attacks with honor. One can recall, for example, an article in Bloomberg about spy microchips, which remained without evidence.

And now such a puncture out of the blue. There was a precedent. I don't like the story, it looks strange and raises questions.

It is said that Weijing Wang, who took the Polish name Stanislav, was widely known in the narrow circles of the Polish telecommunications business and knew everyone he needed to know. Weijing Wang was an attaché at the embassy, ​​and then became first a PR director at Huawei, and then a sales director. All this is in the B2G sector, that is, supplies to the state, so the transition from PR to sales is possible, because in B2G everything is more PR than sales. B2G is an area where supervision is especially thorough. Since 2011, Wang has been working at Huawei, before that he was an attaché for 4 years. And it is strange that they arrested only now. Was there really no supervision of the former attaché before? The position is not the most common, and the transition to another job is also not commonplace.

I have no illusions that if the party asks, Huawei will answer: “Yes!” Frankly speaking, any company in any country, to which the fatherland will turn in difficult times, will do so. But this particular story is too absurd. The question arises, who benefits if Huawei is caught red-handed?

About results statements and the stock market

In addition to Apple, Samsung warned about the decline in profits, followed by LG. In general, such statements are not typical for both companies. But the idea is simple. All companies are public, therefore, one way or another, they worry about the value of shares. And one of the characteristics of the stock market is that it is subject to investor sentiment, not real events. The best example is Elon Musk's ill-fated $420 Tesla share buyback tweet.

Echo: Huawei spies and the Samsung crisis?

After all, why are investors so angry with him and dragged him through the courts? Investment funds "play" not only to increase, but also to decrease. Entire floors are occupied by offices with analysts who are along > across comb through all available information. They create analytical reports, and then throw them into the media field through the media and social networks (usually a link on Twitter) and watch the reaction. The Valeant Pharmaceuticals scandal is widely known. An information attack (of course, on the case!) On it by funds specializing in short play was carried out for almost 2 years. As a result, they "pushed through" to the point that the shares fell in price by 90%, and the company itself was forced to change its name. Now it's Bausch Health.

And "shorting" Tesla is generally one of the favorite pastimes of investors. Doing this is easy and simple, which is why there are so many notes about “jambs” in management, quality problems, etc. However, investment funds also have protection against losses, that is, instructions that if the value of shares goes beyond the established limits, then they must be bought or sold. Accordingly, Musk's tweet led to a jump in the rate, "stop losses" worked, and the funds suffered losses.

So, by reporting in advance that the results will be lower than expected, companies accustom investors to this idea. At the moment, the share price will fall, but the market will quickly win back the lost time, and when the official reports are released, this will no longer affect the share price, and if the numbers are at least a little better than previously announced, then the shares can grow even more. It is for this reason that, seeing the discrepancy between the plan and the fact, companies tend to lay straws. It must be understood that the situation is not particularly unique. Usually, “lured” analysts are used for this, who issue notes that such and such a company, according to such and such estimates, is planning to reduce profits. In this case, the fall is too severe, so Samsung had to take matters into its own hands.

Samsung Falls

Company structure

Samsung expects a 29% decline in operating profit. However, before talking about the reasons, let's take two steps aside. It seems that not everyone understands what the business of Samsung Electronics consists of. By the way, pay attention to the name. This is not about the entire Samsung chaebol, which is “a businessman and banker, owner of factories, newspapers, steamboats”, but about an electronics company. Usually, when we say Samsung, we mean Samsung Electronics, whose business is based on 3 pillars and 1 support:

  • Harman (support) - audio, bought recently, brings little, we will not talk about them further;
  • CE - Consumer Electronics (excluding printers) - consumer electronics, VD, Visual Display plays a leading role in it, these are TVs;
  • IM - IT & Mobile communications - this includes mobile phones and brings 99% of the revenue from the entire subgroup;
  • DS - Device Solutions, these are components, the division can be divided into two parts:
    - Semiconductor - semiconductors, 90% of which are sales of DRAM memory
    - DP - Display Panel - screens.

For example, this is how the revenue contribution of each division for 2017 looks like. The year is not important, the schedule is rather to understand the structure of the business.

Echo: Huawei spies and the Samsung crisis?

As you can see, the main revenue (82%) comes from the production of phones and components (memory, other semiconductors and screens). And here is what the breakdown by operating profit looks like:

Echo: Huawei spies and the Samsung crisis?

Judging by this graph, it is easy to assume that Samsung's main business is the production of components, or rather, memory. And there is something in this, since for the last almost two years it was DRAM sales that allowed Samsung to make financial records. In the graph below, the green line (DS) is semiconductors and screens, and the blue line is mobile phones.

Echo: Huawei spies and the Samsung crisis?

Q3 2016 is the write-off of the Galaxy Note 7. Putting aside this blemish, mobile phone operating income has been in the 2 to 4 trillion won range since 2015.

Causes of the crash

The Jan. 8 notice that there will be a 28.71% decline in profits refers specifically to semiconductors, and specifically to memory.

There are several reasons for this. First, it's still the same macroeconomic downturn in the field of mobile electronics. You can read this paragraph from the last issue about the slowdown in the Chinese economy:

Samsung's decline statement shows that not only China, but the whole world is "slipping". China is a big market, but it alone wouldn't be able to drop Samsung's sales like that. Here you need to understand the fact that Samsung is the leader in the memory market. Everything is purchased from him: from mobile phone manufacturers to data centers. If you need a good memory, then you go to Samsung.

Secondly, notice how the memory shot out in Q3 2018 on the graph. Space growth. Many bought for the future, and sales of phones fell apart.

Thirdly, computer scientists and data centers have also reduced purchases. Data centers grew by leaps and bounds during the cryptocurrency fever. Thanks to this, sales of video cards grew, but, in addition to graphics, other components are also needed, so Samsung also grew steadily. Now it is becoming unprofitable to mine bitcoins, and the miners have cooled their ardor. Regrets about this have already been heard in the reports of Nvidia, which produced graphics with a margin of almost 2 years in advance.

Samsung everything?

Short answer: of course not. Like Apple, Samsung is also generally doing well. The company stands firmly on its feet. It makes money by selling phones and supplying components that everyone from obscure Chinese companies to Apple buys (it's no secret that the iPhone has both the memory and the screen from Samsung). Accordingly, speaking about Samsung Electronics in general, it is important to understand the following principle: the market grows - profit grows, the market falls - profit falls. This is so because the three remaining divisions will not outweigh the semiconductor drawdown. The situation is clearly visible in the chart below. Q4 2018 is given as the official forecast from Samsung.

Echo: Huawei spies and the Samsung crisis?

A one-third decrease in profits means a return to the level of Q1 2017, that is, the moment when the bitcoin bubble just started to inflate. Accordingly, the protracted breakthrough of semiconductors into space is explained by traction in the market and a fortunate combination of circumstances, when Samsung was in an advantageous position: the market was not ready for an increase in demand for memory. Accordingly, under the influence of the market, other manufacturers also expanded production, and demand stalled. Now we have to wait for the next growth cycle.

I really like the word that is used in the Western press in relation to Samsung. They call him bellwether. This is a leader ram with a bell at the head of the herd.

As long as Samsung is such a ram, the company is doing well. You need to worry if a lot of new component manufacturers suddenly appear on the market, offering something better or cheaper.

Echo: Huawei spies and the Samsung crisis?

If Samsung and Apple are doing well, who is doing poorly?

LG is bad, but HTC is bad - put out the lights in general. However, LG will always be in business, as it is a huge conglomerate (like Samsung) that has all the other divisions profitable, and they are already used to LG Mobile not making money. But what about HTC is a big question, which will be covered in a separate article in the near future.

Instead of a conclusion

There should have been one more paragraph dedicated to comments in the text. But the editors said that there would be no benefit: they would not understand, they would only be offended. I agreed, but still I urge you not to hang labels, look at the world more broadly, first think, and then speak and do.

Echo: Huawei spies and Samsung crisis?

The last issue was compared with Spillikins. Flattering, of course, but far from the truth. Previously, such notes were published under the heading "Mixture". This year I decided to split. "Mixture" will be an entertaining format, "Echo" will be more serious.

Content

Short line

About Apple

I didn't know when the previous release came out that Apple had integrated iTunes and AirPlay 2 into third party smart TVs. The decision is unexpected, but expected. Expected, since Apple and Amazon announced a partnership in early December: Alexa's Amazon Echo speaker got access to Apple Music (HomePod no longer benefits). It is logical that the next step should have been in the field of video. But surprisingly, it's so fast. I thought they would tell at WWDC in the summer. After all, these two agreements in Cupertino, in fact, sentenced the HomePod column and Apple TV. And if the column never took off, then the TV set-top box was quite an independent category with its own features.

This decision suggests that Apple is betting on the content of its current and future services (there are already rumors that the company is planning a video service like Netflix). And the thing about video services with their own content is that they need a very large customer base to be profitable, so Apple is looking for access to audiences outside of its ecosystem. Learn more about streaming services here:

About Tesla

Last week, Gigafactory 1 was opened in China in partnership with Panasonic. This is a factory for the production of batteries for electric vehicles. Typically, automakers buy batteries on the side, and participate in development as much as possible. Tesla will have its own production.

Echo: Huawei spies and the Samsung crisis?

Firstly, now the company will not have supply disruptions. Secondly, the plant has already become the largest in the world (total annual capacity is 20 gigawatts, and it is planned to increase to 35 GW) and promises a better price per kilowatt in a battery than the current market leader LG - $111 against $148. This means that Tesla will be able to sell batteries. There is already a shortage on the market, and here the free capacity is also lower and the price is lower.

Huawei and Spies

In Poland, authorities have arrested Weijing Wang, Huawei's local director of B2G sales. And this is very bad.

Echo: Huawei spies and the Samsung crisis?

Since 2012, the United States has accused Huawei of espionage. However, all these years, Huawei has not given reason to doubt itself. And one of the main evidence of innocence was the lack of evidence. Huawei has never been seen in spy scandals and withstood attacks with honor. One can recall, for example, an article in Bloomberg about spy microchips, which remained without evidence.

And now such a puncture out of the blue. There was a precedent. I don't like the story, it looks strange and raises questions.

It is said that Weijing Wang, who took the Polish name Stanislav, was widely known in the narrow circles of the Polish telecommunications business and knew everyone he needed to know. Weijing Wang was an attaché at the embassy, ​​and then became first a PR director at Huawei, and then a sales director. All this is in the B2G sector, that is, supplies to the state, so the transition from PR to sales is possible, because in B2G everything is more PR than sales. B2G is an area where supervision is especially thorough. Since 2011, Wang has been working at Huawei, before that he was an attaché for 4 years. And it is strange that they arrested only now. Was there really no supervision of the former attaché before? The position is not the most common, and the transition to another job is also not commonplace.

I have no illusions that if the party asks, Huawei will answer: “Yes!” Frankly speaking, any company in any country, to which the fatherland will turn in difficult times, will do so. But this particular story is too absurd. The question arises, who benefits if Huawei is caught red-handed?

About results statements and the stock market

In addition to Apple, Samsung warned about the decline in profits, followed by LG. In general, such statements are not typical for both companies. But the idea is simple. All companies are public, therefore, one way or another, they worry about the value of shares. And one of the characteristics of the stock market is that it is subject to investor sentiment, not real events. The best example is Elon Musk's ill-fated $420 Tesla share buyback tweet.

Echo: Huawei spies and the Samsung crisis?

After all, why are investors so angry with him and dragged him through the courts? Investment funds "play" not only to increase, but also to decrease. Entire floors are occupied by offices with analysts who are along > across comb through all available information. They create analytical reports, and then throw them into the media field through the media and social networks (usually a link on Twitter) and watch the reaction. The Valeant Pharmaceuticals scandal is widely known. An information attack (of course, on the case!) On it by funds specializing in short play was carried out for almost 2 years. As a result, they "pushed through" to the point that the shares fell in price by 90%, and the company itself was forced to change its name. Now it's Bausch Health.

And "shorting" Tesla is generally one of the favorite pastimes of investors. Doing this is easy and simple, which is why there are so many notes about “jambs” in management, quality problems, etc. However, investment funds also have protection against losses, that is, instructions that if the value of shares goes beyond the established limits, then they must be bought or sold. Accordingly, Musk's tweet led to a jump in the rate, "stop losses" worked, and the funds suffered losses.

So, by reporting in advance that the results will be lower than expected, companies accustom investors to this idea. At the moment, the share price will fall, but the market will quickly win back the lost time, and when the official reports are released, this will no longer affect the share price, and if the numbers are at least a little better than previously announced, then the shares can grow even more. It is for this reason that, seeing the discrepancy between the plan and the fact, companies tend to lay straws. It must be understood that the situation is not particularly unique. Usually, “lured” analysts are used for this, who issue notes that such and such a company, according to such and such estimates, is planning to reduce profits. In this case, the fall is too severe, so Samsung had to take matters into its own hands.

Samsung Falls

Company structure

Samsung expects a 29% decline in operating profit. However, before talking about the reasons, let's take two steps aside. It seems that not everyone understands what the business of Samsung Electronics consists of. By the way, pay attention to the name. This is not about the entire Samsung chaebol, which is “a businessman and banker, owner of factories, newspapers, steamboats”, but about an electronics company. Usually, when we say Samsung, we mean Samsung Electronics, whose business is based on 3 pillars and 1 support:

  • Harman (support) - audio, bought recently, brings little, we will not talk about them further;
  • CE - Consumer Electronics (excluding printers) - consumer electronics, VD, Visual Display plays a leading role in it, these are TVs;
  • IM - IT & Mobile communications - this includes mobile phones and brings 99% of the revenue from the entire subgroup;
  • DS - Device Solutions, these are components, the division can be divided into two parts:
    - Semiconductor - semiconductors, 90% of which are sales of DRAM memory
    - DP - Display Panel - screens.

For example, this is how the revenue contribution of each division for 2017 looks like. The year is not important, the schedule is rather to understand the structure of the business.

Echo: Huawei spies and the Samsung crisis?

As you can see, the main revenue (82%) comes from the production of phones and components (memory, other semiconductors and screens). And here is what the breakdown by operating profit looks like:

Echo: Huawei spies and the Samsung crisis?

Judging by this graph, it is easy to assume that Samsung's main business is the production of components, or rather, memory. And there is something in this, since for the last almost two years it was DRAM sales that allowed Samsung to make financial records. In the graph below, the green line (DS) is semiconductors and screens, and the blue line is mobile phones.

Echo: Huawei spies and the Samsung crisis?

Q3 2016 is the write-off of the Galaxy Note 7. Putting aside this flaw, it is noticeable that operating income from mobile phones since 2015 is in the corridor from 2 to 4 trillion Korean won.

Causes of the crash

The Jan. 8 notice that there will be a 28.71% decline in profits refers specifically to semiconductors, and specifically to memory.

There are several reasons for this. First, it's still the same macroeconomic downturn in the field of mobile electronics. You can read this paragraph from the last issue about the slowdown in the Chinese economy:

Samsung's decline statement shows that not only China, but the whole world is "slipping". China is a big market, but it alone wouldn't be able to drop Samsung's sales like that. Here you need to understand the fact that Samsung is the leader in the memory market. Everything is purchased from him: from mobile phone manufacturers to data centers. If you need a good memory, then you go to Samsung.

Secondly, notice how the memory shot out in Q3 2018 on the graph. Space growth. Many bought for the future, and sales of phones fell apart.

Thirdly, computer scientists and data centers have also reduced purchases. Data centers grew by leaps and bounds during the cryptocurrency fever. Thanks to this, sales of video cards grew, but, in addition to graphics, other components are also needed, so Samsung also grew steadily. Now it is becoming unprofitable to mine bitcoins, and the miners have cooled their ardor. Regrets about this have already been heard in the reports of Nvidia, which produced graphics with a margin of almost 2 years in advance.

Samsung everything?

Short answer: of course not. Like Apple, Samsung is also generally doing well. The company stands firmly on its feet. It makes money by selling phones and supplying components that everyone from obscure Chinese companies to Apple buys (it's no secret that the iPhone has both the memory and the screen from Samsung). Accordingly, speaking about Samsung Electronics in general, it is important to understand the following principle: the market grows - profit grows, the market falls - profit falls. This is so because the three remaining divisions will not outweigh the semiconductor drawdown. The situation is clearly visible in the chart below. Q4 2018 is given as the official forecast from Samsung.

Echo: Huawei spies and the Samsung crisis?

A one-third decrease in profits means a return to the level of Q1 2017, that is, the moment when the bitcoin bubble just started to inflate. Accordingly, the protracted breakthrough of semiconductors into space is explained by traction in the market and a fortunate combination of circumstances, when Samsung was in an advantageous position: the market was not ready for an increase in demand for memory. Accordingly, under the influence of the market, other manufacturers also expanded production, and demand stalled. Now we have to wait for the next growth cycle.

I really like the word that is used in the Western press in relation to Samsung. They call him bellwether. This is a leader ram with a bell at the head of the herd.

As long as Samsung is such a ram, the company is doing well. You need to worry if a lot of new component manufacturers suddenly appear on the market, offering something better or cheaper.

Echo: Huawei spies and the Samsung crisis?

If Samsung and Apple are doing well, who is doing poorly?

LG is bad, but HTC is bad - put out the lights in general. However, LG will always be in business, as it is a huge conglomerate (like Samsung) that has all the other divisions profitable, and they are already used to LG Mobile not making money. But what about HTC is a big question, which will be covered in a separate article in the near future.

Instead of a conclusion

There should have been one more paragraph dedicated to comments in the text. But the editors said that there would be no benefit: they would not understand, they would only be offended. I agreed, but still I urge you not to hang labels, look at the world more broadly, first think, and then speak and do.

Echo: Huawei spies and Samsung crisis?

The last issue was compared with Spillikins. Flattering, of course, but far from the truth. Previously, such notes were published under the heading "Mixture". This year I decided to split. "Mixture" will be an entertaining format, "Echo" will be more serious.

Content

Short line

About Apple

I didn't know when the previous release came out that Apple had integrated iTunes and AirPlay 2 into third party smart TVs. The decision is unexpected, but expected. Expected, since Apple and Amazon announced a partnership in early December: Alexa's Amazon Echo speaker got access to Apple Music (HomePod no longer benefits). It is logical that the next step should have been in the field of video. But surprisingly, it's so fast. I thought they would tell at WWDC in the summer. After all, these two agreements in Cupertino, in fact, sentenced the HomePod column and Apple TV. And if the column never took off, then the TV set-top box was quite an independent category with its own features.

This decision suggests that Apple is betting on the content of its current and future services (there are already rumors that the company is planning a video service like Netflix). And the thing about video services with their own content is that they need a very large customer base to be profitable, so Apple is looking for access to audiences outside of its ecosystem. Learn more about streaming services here:

About Tesla

Last week, Gigafactory 1 was opened in China in partnership with Panasonic. This is a factory for the production of batteries for electric vehicles. Typically, automakers buy batteries on the side, and participate in development as much as possible. Tesla will have its own production.

Firstly, now the company will not have supply disruptions. Secondly, the plant has already become the largest in the world (total annual capacity is 20 gigawatts, and it is planned to increase to 35 GW) and promises a better price per kilowatt in a battery than the current market leader LG - $111 against $148. This means that Tesla will be able to sell batteries. There is already a shortage on the market, and here the free capacity is also lower and the price is lower.

Huawei and spies

In Poland, authorities have arrested Weijing Wang, Huawei's local director of B2G sales. And this is very bad.

Since 2012, the United States has accused Huawei of espionage. However, all these years, Huawei has not given reason to doubt itself. And one of the main evidence of innocence was the lack of evidence. Huawei has never been seen in spy scandals and withstood attacks with honor. One can recall, for example, an article in Bloomberg about spy microchips, which remained without evidence.

And now such a puncture out of the blue. There was a precedent. I don't like the story, it looks strange and raises questions.

It is said that Weijing Wang, who took the Polish name Stanislav, was widely known in the narrow circles of the Polish telecommunications business and knew everyone he needed to know. Weijing Wang was an attaché at the embassy, ​​and then became first a PR director at Huawei, and then a sales director. All this is in the B2G sector, that is, deliveries to the state, so the transition from PR to sales is possible, because in B2G everything is more PR than sales. B2G is an area where supervision is especially thorough. Since 2011, Wang has been working at Huawei, before that he was an attaché for 4 years. And it is strange that they arrested only now. Was there really no supervision of the former attaché before? The position is not the most common, and the transition to another job is also not commonplace.

I have no illusions that if the party asks, Huawei will answer: "Yes!" Frankly speaking, any company in any country, to which the fatherland will turn in difficult times, will do so. But this particular story is way too absurd. The question arises, who benefits if Huawei is caught red-handed?

About results statements and the stock market

In addition to Apple, Samsung warned about the decline in profits, followed by LG. In general, such statements are not typical for both companies. But the idea is simple. All companies are public, therefore, one way or another, they worry about the value of shares. And one of the characteristics of the stock market is that it is subject to investor sentiment, not real events. The best example is Elon Musk's ill-fated $420 Tesla share buyback tweet.

After all, why are investors so angry with him and dragged him through the courts? Investment funds "play" not only to increase, but also to decrease. Entire floors are occupied by offices with analysts who comb through all the available information along and across https://cars45.com/listing/bmw/3_series/2012. They create analytical reports, and then throw them into the media field through the media and social networks (usually a link on Twitter) and watch the reaction. The Valeant Pharmaceuticals scandal is widely known. An information attack (of course, on the case!) On it by funds specializing in short play was carried out for almost 2 years. As a result, they "pushed through" to the point that the shares fell in price by 90%, and the company itself was forced to change its name. Now it's Bausch Health.

After all, why did investors get so mad at him and dragged him through the courts? Investment funds "play" not only to increase, but also to decrease. Entire floors are occupied by offices with analysts, who along and https://cars45.com/listing/bmw/3_series/2012 https://cars45.com/listing/bmw/3_series/2012 across comb through all the available information. They create analytical reports, and then throw them into the media field through the media and social networks (usually a link on Twitter) and watch the reaction. The Valeant Pharmaceuticals scandal is widely known. An information attack (of course, on the case!) On it by funds specializing in short play was carried out for almost 2 years. As a result, they "pushed through" to the point that the shares fell in price by 90%, and the company itself was forced to change its name. Now it's Bausch Health.

And "shorting" Tesla is generally one of the favorite pastimes of investors. Doing this is easy and simple, which is why there are so many notes about “jambs” in management, quality problems, etc. However, investment funds also have protection against losses, that is, instructions that if the value of shares goes beyond the established limits, then they must be bought or sold. Accordingly, Musk's tweet led to a jump in the rate, "stop losses" worked, and the funds suffered losses.

So, by reporting in advance that the results will be lower than expected, companies accustom investors to this idea. At the moment, the share price will fall, but the market will quickly win back the lost time, and when the official reports are released, this will no longer affect the share price, and if the numbers are at least a little better than previously announced, then the shares can grow even more. It is for this reason that, seeing the discrepancy between the plan and the fact, companies tend to lay straws. It must be understood that the situation is not particularly unique. Usually, “lured” analysts are used for this, who issue notes that such and such a company, according to such and such estimates, is planning to reduce profits. In this case, the fall is too severe, so Samsung had to take matters into its own hands.

Samsung Falls

Company structure

Samsung expects a 29% decline in operating profit. However, before talking about the reasons, let's take two steps aside. It seems that not everyone understands what the business of Samsung Electronics consists of. By the way, pay attention to the name. This is not about the entire Samsung chaebol, which is “a businessman and banker, owner of factories, newspapers, steamboats”, but about an electronics company. Usually, when we say Samsung, we mean Samsung Electronics, whose business is based on 3 pillars and 1 support:

  • Harman (support) - audio, bought recently, brings little, we will not talk about them further;
  • CE - Consumer Electronics (excluding printers) - consumer electronics, VD, Visual Display plays a leading role in it, these are TVs;
  • IM - IT & Mobile communications - this includes mobile phones and brings 99% of the revenue from the entire subgroup;
  • DS - Device Solutions, these are components, the division can be divided into two parts: - Semiconductor - semiconductors, 90% of which are sales of DRAM memory - DP - Display Panel - screens.

For example, this is how the revenue contribution of each division for 2017 looks like. The year is not important, the schedule is rather to understand the structure of the business.

As you can see, the main revenue (82%) comes from the production of phones and components (memory, other semiconductors and screens). And here is what the breakdown by operating profit looks like:

Judging by this graph, it is easy to assume that Samsung's main business is the production of components, or rather, memory. And there is something in this, since for the last almost two years it was DRAM sales that allowed Samsung to make financial records. In the graph below, the green line (DS) is semiconductors and screens, and the blue line is mobile phones.

Q3 2016 is the write-off of the Galaxy Note 7. Putting aside this flaw, it is noticeable that operating income from mobile phones since 2015 is in the corridor from 2 to 4 trillion Korean won.

Causes of the crash

The Jan. 8 notice that there will be a 28.71% decline in profits refers specifically to semiconductors, and specifically to memory.

There are several reasons for this. First, it's still the same macroeconomic downturn in the field of mobile electronics. You can read this paragraph from the last issue about the slowdown in the Chinese economy:

Samsung's decline statement shows that not only China, but the whole world is "slipping". China is a big market, but alone it wouldn't be able to drop Samsung's sales like that. Here you need to understand the fact that Samsung is the leader in the memory market. Everything is purchased from him: from mobile phone manufacturers to data centers. If you need a good memory, then you go to Samsung.

Secondly, notice how the graph "shot" the memory in the 3rd quarter of 2018. Space growth. Many bought for the future, and sales of phones fell apart.

Thirdly, computer scientists and data centers have also reduced purchases. Data centers grew by leaps and bounds during the cryptocurrency fever. Thanks to this, sales of video cards grew, but, in addition to graphics, other components are also needed, so Samsung also grew steadily. Now it is becoming unprofitable to mine bitcoins, and the miners have cooled their ardor. Regrets about this have already been heard in the reports of Nvidia, which produced graphics with a margin of almost 2 years in advance.

Samsung everything?

Short answer: of course not. Like Apple, Samsung is generally doing well too. The company stands firmly on its feet. It makes money by selling phones and supplying components that everyone from obscure Chinese companies to Apple buys (it's no secret that the iPhone has both the memory and the screen from Samsung). Accordingly, speaking about Samsung Electronics as a whole, it is important to understand the following principle: the market grows - profit grows, the market falls - profit falls. This is so because the three remaining divisions will not outweigh the semiconductor drawdown. The situation is clearly visible in the chart below. Q4 2018 is given as the official forecast from Samsung.

A one-third decrease in profits means a return to the level of Q1 2017, that is, the moment when the bitcoin bubble just started to inflate. Accordingly, the protracted breakthrough of semiconductors into space is explained by traction in the market and a fortunate combination of circumstances, when Samsung was in an advantageous position: the market was not ready for an increase in demand for memory. Accordingly, under the influence of the market, other manufacturers also expanded production, and demand stalled. Now we have to wait for the next growth cycle.

I really like the word that is used in the Western press in relation to Samsung. They call him bellwether. This is a leader ram with a bell at the head of the herd.

As long as Samsung is such a ram, the company is doing well. You need to worry if a lot of new component manufacturers suddenly appear on the market, offering something better or cheaper.

If Samsung and Apple are doing well, who is doing poorly?

LG is bad, but HTC is bad - put out the lights in general. However, LG will always be in business, as it is a huge conglomerate (like Samsung) that has all the other divisions profitable, and they are already used to LG Mobile not making money. But what about HTC is a big question, which will be covered in a separate article in the near future.

Instead of a conclusion

There should have been one more paragraph dedicated to comments in the text. But the editors said that there would be no benefit: they would not understand, they would only be offended. I agreed, but still I urge you not to hang labels, look at the world more broadly, first think, and then speak and do.