Samsung Electronics Co. said Tuesday its second-quarter net profit edged down 0.09 percent on-year amid weak returns from the smartphone business, although the chip business posted another quarterly record profit.

Net profit came to 11.04 trillion won ($9.8 billion) in the April-June period, compared with 11.05 trillion won posted a year earlier, Samsung said in its regulatory filing.

Operating profit came to 14.87 trillion won, up 5.71 percent from the previous year. Sales edged down 4.13 percent to 58.48 trillion won.

It marked the first time in five quarters for Samsung to post sales below 60 trillion won. The operating profit also fell 4.94 percent on-quarter, which marks the first decline in seven quarters.

The announcement came in line with the guidance report released earlier this month.

Samsung Electronics said its chip business posted an operating profit of 11.61 trillion won, rising a sharp 44 percent from 8.03 trillion won posted a year earlier.

 The second-quarter operating profit for the chip business was an all-time high, beating the previous record of 11.5 trillion won posted in the first quarter of 2018.

Samsung said it was able to maintain growth for the division despite weaker demand for smartphones due to the rising orders from data center operators.

"For NAND, demand remained robust on the back of the continuing trend toward higher density for smartphones and the increase in demand for server SSD due to expansion of cloud infrastructure. Samsung posted solid earnings by responding to new mobile device launches and demand for higher density products," the company said.

"For DRAM, server demand stayed strong owing to the ongoing shift to higher density and expansion of data center infrastructure. In the mobile market, despite concerns over a slowdown in smartphone growth, increase in memory content per device continued," it added.

As for the second half of 2018, Samsung said it expects the sales to increase on the back of rising demand for mobile application processors and image sensors.

"Samsung will also strengthen its process technology leadership by beginning 8-nanometer mass production and EUV-based 7-nanometer test production," it added.

With the chip business accounting for a whopping 78.1 percent of the combined operating profit in the second quarter, however, industry watchers said Samsung should do more to ease such a heavy dependency.

The display panel business posted an operating profit of 140 billion won, falling sharply from 1.7 trillion won posted a year earlier and from 410 billion won posted a quarter earlier.

"For OLED, earnings decreased quarter-on-quarter despite improved factory utilization for rigid products, as demand from major customers for flexible panels remained slow," the company explained.

"Earnings from LCD also declined from the previous quarter as the shipment and average panel price continued the downward trend," it added. 

The IT and mobile division, which oversees the smartphone business, posted an operating profit of 2.67 trillion won, falling 34 percent from 4.06 trillion won tallied a year earlier.

Samsung attributed the weak sales from the IT and mobile business to weak sales of flagship models, such as the Galaxy S9, along with increased marketing expenditures. The company also claimed that intensified global competition affected its performance.

Local analysts estimate the second-quarter shipment of the Galaxy S9 at 8 million units, with the combined sales of 2018 reaching 28 million units.

If the estimate is realized, the Galaxy S9 would become the worst performing S-model since the Galaxy S3 in 2012.

The shipment of the Galaxy S8, released in 2017, came to 37.5 million units on its first year, while that of the Galaxy S7 hit 48.5 million units in 2016.

It predicted that the market for smartphones and tablet PCs in the second half will remain a challenge despite the rise in seasonal demand.

To cope with the situation, Samsung Electronics said it will soon release a new Note smartphone at a "reasonable price," and apply top-notch features on budget models. It will also take steps to bolster the competitiveness of Samsung devices.

"The market for the premium smartphones decreased, and the market also resisted against the increase in prices," Samsung said, claiming it failed to enjoy immediate effects of various financial programs to promote the sales of its products.

The company said it sold 78 million units of handsets in the second quarter, along with 5 million units of tablet PCs. Smartphones accounted for 90 percent of its handset sales, it added.

Samsung Electronics plans to showcase the Galaxy Note 9 smartphone on Aug. 9 and start full-fledged sales later in the month.

The Galaxy Note 8 was showcased on Aug. 23 last year and went on sale on Sept. 21.

The company said it also plans to expand the scope of services powered by artificial-intelligence technology, and seek to improve connectivity with voice-recognition system Bixby and mobile payment tool Samsung Pay.

The consumer electronics division posted an operating profit of 510 billion won in the second quarter, up 45 percent from 350 billion won reported in the previous year, the tech giant added.

 Samsung attributed the robust performance of the consumer electronics business to improved sales of high-end TVs, including the QLED TVs.

For the second half of 2018, Samsung said the division is expected to continue growth on the back of rising demand from advanced markets. The company said it plans to showcase various QLED models to meet with the high seasonal demand expected for later this year.

 The global electronics manufacturer said it led the market for TVs sized 75 inches and larger in the second quarter, with its share standing at more than 50 percent.

The company said it will continue to solidify its reputation in the market for large-sized TVs down the road.

Samsung then said it is preparing the release of micro LED TVs customized for businesses and households, respectively. The company said the business micro LED TVs will be mass produced starting in October, with those for households reaching the market in 2019.

Samsung Electronics said it has allocated 8 trillion won in facilities investment for the second quarter. By segment, the chip business accounted for 6.1 trillion won, followed by the display division with 1.1 trillion won.

For the first half of 2018, Samsung invested 13.3 trillion won in chips and 1.9 trillion won in displays, rolling out a combined 16.6 trillion won in facilities investment.

Samsung said it also decided to hand out dividends of 354 won per shares, with the combined amount of 2.4 trillion won.

Shares of Samsung Electronics traded at 46,150 won as of 10:03 a.m., down 0.75 percent from the previous session. The second-quarter report was announced before the stock market's opening Tuesday. (Yonhap)