Samsung Electronics suffered a 60 percent fall in its first-quarter earnings on weak memory chip prices but expected demand to rebound in the second half of the year on the back of high-value products and mobile devices.
The South Korean tech giant posted a net profit of 5.04 trillion won ($4.3 billion) in the January-March period, the lowest since the third quarter of 2016, its regulatory filing showed.
Its operating profit dropped 60.1 percent on-year to 6.2 trillion won, and sales slipped 13.5 percent to 52.4 trillion won over the cited period, it said. The figures were in line with its market guidance released earlier this month.
The world’s largest memory chip and smartphone maker had warned investors of weaker-than-expected quarterly earnings, citing sluggish memory chip and display sales.
“The first-quarter earnings were weighed down by a slump in memory chips and displays, although the newly launched Galaxy S10 smartphone logged solid sales,” Samsung said in a release.
The semiconductor business slumped due to a fall in memory chip prices as data centers continued to adjust their inventory levels, it said.
The company said it has been conducting “line optimization” for its fabrication lines to improve efficiency of its production process and help deal with a supply glut in the market.
Samsung expected “limited improvement” in the memory chip market in the second quarter, anticipating memory chip demand to pick up in the second half thanks to rising demand for high-density products.
“For the second half of 2019, the company expects memory chip demand for high-density products to increase, but uncertainties in the external environment will persist,” Samsung said. “A further recovery is seen for the display business as demand for flexible screens is set to rise on new smartphone launches.”
Profitability in the IT and mobile communications division also slumped in the first quarter from a year earlier due to toughening competition in the lower-end segment. Revamping the company’s mass-market lineup also led to a yearly decrease in sales volume of its smartphones, the company noted.
The display panel business suffered a quarterly loss for the first time in three years due to reduced demand for flexible displays and a supply glut in large displays.
The system LSI and foundry businesses posted robust performances thanks to smartphone application processors, the “brains” for handsets.
Samsung said its earnings from its network business also improved, buoyed by the launch of 5G telecommunication services in Korea earlier this month.
The tech behemoth’s consumer electronics division fared well on the back of increased sales of premium TVs such as QLED TVs and ultra-large size models, it said.
By Ram Garikipati and newswires (firstname.lastname@example.org)