South Korean tech giants Samsung Electronics and LG are likely to see contracted earnings in the third quarter due to sluggish smartphone sales, market analysts said Monday.

Local financial data provider FnGuide recently set the market consensus for Samsung Electronics’ operating profit for the July-September period at 7.6 trillion won ($6.8 billion). The figure is a more than 8 percent fall from the same period last year and 1 trillion won below market expectations before reports of the Galaxy Note 7 explosions. 


“The recall may cost Samsung Electronics up to 1.5 trillion won, an equivalent of around 4.8 percent of this year’s estimated operating income,” said Cho Seung-bin, an analyst at Daishin Securities.

Following the recall issue, Hanwha Investment & Securities revised down estimated sales figures for the Galaxy Note 7 in the fourth quarter from 7.5 million units to 6 million units. More than 200,000 local consumers have already replaced their Galaxy Note 7 with new ones.

Samsung Electronics’ local rival LG Electronics is also expected to report a gloomy outlook in the third quarter, as sales of its LG G5 unveiled in March continued to flop in the third quarter despite the solid performance of its home appliances and televisions thanks to the scorching weather and the Chinese holiday season.

FnGuide set the market consensus for LG Electronics’ operating profit in the third quarter at 371.5 billion won, a more than 35 percent fall from the previous quarter.

“The deficits are predicted to widen in its mobile and communications division due to sluggish sales in smartphones,” said Koh Jung-woo, an analyst at NH Investment & Securities.

The two tech giants, however, are expected to perform better in the coming quarter, analysts predicted.

“Samsung Electronics may see solid performance in the fourth quarter, as rising prices of the DRAM and NAND Flash may help its chip business recover,” said Lee Soon-hak, an analyst at Hanwha Investment & Securities.

LG Electronics is also expected to turn around thanks to a reshuffle in June, the rollout of its new smartphone V20 and solid sales in its home appliances.

“LG Electronics may see a turnaround in the last quarter thanks to lowered fixed costs following intensive restructuring in its mobile and communication division alongside the rollout of the V20,” said Kim Ji-san, an analyst at Kiwoom Securities.

By Shin Ji-hye (shinjh@heraldcorp.com)