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Announces a quarterly operating profit of KRW 6,600 billion
on sales of KRW 56.13 billion
Memory chip market remains weak, demand is recovering
in the midst of external uncertainties
Investments in future technologies such as AI,
automotive components to continue
Samsung Electronics today announced its financial results for the second quarter ended June 30, 2019. The company recorded a quarterly consolidated business turnover of KRW 56.13 billion and a profit from operations. quarterly of KRW 6.6 trillion.
The weakness and price declines in the memory chip market have persisted, with the effects of inventory adjustments from major data center customers continuing in previous quarters, despite a limited recovery in demand.
The Billboard business recorded an improvement due to the unique rise of mobile screens and stronger sales of rigid OLED panels, which offset the losses badociated with large screens.
The mobile business recorded stronger shipments on new mbad market models, but was generally burdened by slower sales of flagship models and increased marketing spending. The Network business posted strong results in the commercialization of 5G service in South Korea.
Consumer electronics has been boosted by strong sales of new home appliances and by improving the profitability of refrigerators and washing machines, although the profits of televisions have declined slightly compared with the previous year. 39, previous year due to the intensification of competition.
For the second half, Samsung expects persistent uncertainties in the memory sector, although demand continues to grow due to strong seasonality and the adoption of higher density products. For system semiconductors, there is also a growing demand for access points, image sensors and mobile display driver (DDI) ICs.
In terms of screens, launches of new smartphone products are designed to improve mobile display revenue, but a generally weak demand in the smartphone market in general may limit the upside potential.
As competition in the smartphone market increases in the second half, Samsung plans to improve its product line and increase sales of new consumer models. The network company will focus on laying the foundation for its global expansion in the field of 5G.
The Consumer Electronics division expects a seasonal increase in TV sales and will focus on high-end models while offering new devices such as Bespoke refrigerators and AirDressers.
The company faces challenges related to uncertainties not only in the areas of activity, but also to the changing global macroeconomic environment. However, Samsung will continue to invest in improving business capabilities and future technologies, including 5G, semiconductor systems, artificial intelligence and automotive components, to ensure growth in long term.
In the second quarter, Samsung Electronics' investments amounted to KRW 6 200 billion, of which KRW 5.2 trillion in semiconductors and KRW 0.5 billion in screens. Total capital expenditure in the first half amounted to KRW 10,700 billion, of which KRW 8.8 billion for semiconductors and KRW 0.8 billion for screens.
The majority of the company's investments for 2019 are for building demand-side infrastructure beyond 2019, and a larger percentage of this year's investments will be realized in the second half of the year.
A semiconductor sees recovery of demand 2H amidst external uncertainties
The Semiconductor business reported consolidated revenues of KRW 16.9 trillion and operating profit of KRW 3.4 trillion for the quarter.
Despite poor market conditions, the memory sector saw the demand for NAND and DRAM increase, as mobile storage and storage applications continued to adopt higher density products and customers in the data center data have resumed their purchases. In the second half, demand is expected to increase, but the company believes that the sector as a whole is experiencing volatility due to the increase in external uncertainties.
For NAND, the demand for mobile storage and high density, high value data centers is expected to continue to grow and the market is expected to stabilize gradually starting in the third quarter. In SSD, the deployment of high density and high performance products for data centers will grow, while the demand for mobile applications is expected to increase with the release of high-end smartphones with a storage of more than 128 GB. will focus on enhancing competitiveness in the high-end product market and plans to mbad-produce the 6th generation V-NAND this year.
For DRAMs, aggregate demand is expected to increase due to seasonal effects and external uncertainties. Server demand is expected to increase gradually as customers adjust inventory levels and resume purchases, while demand for computers will also increase. In-memory demand for mobile applications is expected to increase steadily due to the introduction of new models of large customers and the trend toward adopting high-density products. The company plans to actively respond to customer demand with a flexible product line and maintain technical leadership through the ramp-up of 1Y nm products.
For the System LSI sector, the benefits have been strong, as the demand for multiple cameras and high-resolution, high-pixel image sensors has increased. The company has also increased its offering of 5G chipset solutions and has continued to develop a next-generation 5G single-chip on-chip system for future technology leadership. In the second half of the year, demand for mobile point-of-view products, image sensors and DDIs is expected to grow with the increased seasonality of smartphones. Samsung plans to increase the offering of high value-added products, including 64 MP image sensors and 7 nm EUV access points, and diversify its offerings by developing sensors and 3D chips / fingerprints on screen for automotive applications and IoT.
In the foundry business, the results were robust, driven by strong demand for mobile access point products and 8/10-nm image sensors from a large customer. In addition, new customer orders in the 10/10 nm process have increased and applications have diversified to include mobile, HPC, automotive and network products. In the second half of the year, earnings growth is expected to continue due to continued growth in orders for AP, image sensors and DDI, as well as increased demand for HPC, including cryptocurrency chips. . The company plans to start mbad production of the EUV 6nm process and aims to strengthen its competitiveness by eliminating the EUV 5nm process and completing the development of the 4nm process.
Display: further improvement in 2H
Billboards posted consolidated revenues of KRW 7.62 billion and operating profit of KRW 0.75 billion for the quarter, returning to a profit in the previous quarter thanks to a one-time gain and a gradual recovery of customer demand.
Revenues from mobile display screens have increased, mainly due to larger shipments of OLED panels incorporating new technologies such as fingerprint display and holes. Sales of large screens also improved slightly over the previous quarter due to the demand for premium panels and reduced costs.
Looking ahead to the second half of the year, Samsung is expecting a new upturn in mobile display sales with higher sales and production, as major customers plan to launch new products. The demand for OLED displays is expected to grow steadily as the smartphone industry adopts more and more thinner displays to support 5G-enabled components.
Samsung will continue to integrate more value-added features into its panels and improve production efficiency, while closely monitoring and responding to global macroeconomic uncertainties and their potential negative impact on the market. the market.
For large screens, despite the growing demand for high-end TV screens, the continued expansion of the overall LCD screen sector's capacity should weigh on market conditions. Samsung will continue its efforts to improve its profitability by focusing on premium TV screens and developing other applications such as monitors and public display of information.
Mobile enhances flagship product line and new Galaxy A series
The IT & Mobile Communications division reported consolidated revenue of KRW 25.86 billion and operating profit of KRW 1.56 billion for the quarter.
While the overall market saw a decline in smartphone demand due to unfavorable macroeconomic conditions and seasonal weakness, Samsung's smartphone shipments grew thanks to strong sales of the new Galaxy A series, including Galaxy A50 and A70. However, sales of flagship models dropped QoQ due to the weak sales momentum of the Galaxy S10 and stagnant demand for high-end products.
Increasing costs badociated with increasing competition in the medium to low segments and inventory adjustment of older models resulted in lower profits for the mobile business. On the other hand, the results of the Networks business have increased thanks to the expansion of the 5G commercial service in South Korea and LTE networks in foreign markets.
In the second half of the year, global demand for the mobile phone market is expected to remain weak due to growing uncertainties in the global economy and trade. Samsung will continue to strengthen its flagship product line and increase sales of new mbad market models. The company will respond quickly to the changing business environment and intensify its efforts to achieve profitability by improving the efficiency of development, manufacturing and marketing operations.
In the third quarter, Samsung will focus on the successful launch of new innovative products – the Galaxy Note 10 and the Galaxy Fold. It will enhance the 5G smartphone range to lead the new market and introduce more competitive A-series models in the second half to extend the current positive momentum of smartphone sales in the mbad market.
The Network business will continue to strengthen its position in the global 5G market, leveraging its leadership in the commercialization of 5G services in South Korea and the United States.
Consumer electronics stimulated by digital devices
The Consumer Electronics division, which includes the Visual and Digital Devices divisions, reported consolidated sales of KRW 11.07 billion and operating profit of KRW 0.71 billion for the second quarter of 2019.
Visual display segment revenues declined slightly, both quarter-on-quarter and year-over-year, due to intensified price competition in the market. However, the Samsung product line improved in the second quarter as new models were introduced and sales of high-end products such as QLED TVs and big-screen TVs expanded.
Despite disadvantages such as unfavorable exchange rates in some emerging markets and increasingly protective global business practices, the TV market is expected to remain broadly unchanged in the second half of 2019. Samsung plans to maximize end-of-quarter sales. year thanks to close cooperation with the retail trade. partners and to strengthen 8K leadership by positioning QLED 8K TVs as mainstream TVs.
For the Digital Devices business, earnings increased significantly year-over-year as a result of the improved profitability of essential appliances such as refrigerators and washing machines. The strong summer demand for air conditioners, including Samsung's windless air conditioner, also contributed to strong sales.
During the rest of the year, Samsung will focus on marketing new consumer lifestyle products, such as the Bespoke and AirDressers refrigerators. The company will also continue to strengthen its B2B business, which includes embedded devices and air conditioners.
※ Consolidated revenue and operating profit by segment based on K-IFRS (2017 ~ 2019 2Q)
Note 1: Sales for each company include intersegment sales
Note 2: CE (Consumer Electronics), IM (IT and Mobile Communications), DS (Appliance Solutions), DP (Display Panel)
Note 3: Information on annual results is shown by division from 2019
Note 4: As of the first quarter of 2017, the profits from the Health and Medical Equipment (MCH) business are excluded from the EC division.
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