Hit by weak demand in the memory chips and displays, Samsung Electronics on Tuesday reported a massive 60 per cent drop in operating profit (year-on-year) in the first quarter of 2019. The company, however, said the newly-launched Galaxy S10 smartphone is generating solid sales.
It shipped 78 million smartphones and five million tablets in the quarter. Samsung posted operating profit of 6.2 trillion won (nearly $5.4 billion) – from 15.64 trillion won (roughly $13.4 billion) last year — and quarterly revenue of 52.4 trillion won which fell 13.5 per cent.
“The Semiconductor business saw a drop in memory chip prices as inventory adjustments continued at data centre companies, while demand for high-density memory for mobile phones increased thanks to new flagship smartphones,” said the South Korean giant.
Samsung said it expects limited improvement in the memory chip market in the second quarter, as demand will likely begin to improve for major applications such as mobile products but price declines will likely continue. The display panel business reported a quarterly loss due to decreased demand for flexible displays and increasing market supplies for large displays.
In the IT & Mobile Communications (IM) division, despite solid sales of the Galaxy S10, profitability in the mobile business declined (YoY) as competition intensified in the low- to mid-range segment. Samsung said it will strengthen its product line-up through innovations such as Galaxy S10 5G and Galaxy A80 and continued reorganization of its product offerings.
For the second half, despite intensified market competition, Samsung expects smartphone sales to increase led by new models in all segments from the Galaxy A series to the Galaxy Note amid strong seasonality. “In the premium segment, the company will strengthen its leadership through the new Galaxy Note as well as its innovative products such as 5G and foldable smartphones,” Samsung said.
It means that Samsung’s much-awaited foldable device “Galaxy Fold” that met with cracking screen controversy may arrive in the later part of the year. Sales of premium TVs such as QLED TVs and ultra-large size models contributed to the (YOY) earnings growth in the Consumer Electronics (CE) division, the company added.