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Announces quarterly operating profit of KRW 6 200 billion on sales of KRW 52 400 billion
Weak demand for memory chips weighs on profits but sales of Galaxy S10 are strong
Samsung Electronics achieved a consolidated quarterly business turnover of KRW 52.4 billion and a quarterly operating profit of KRW 6.2 billion.
First-quarter profits were weighed by weak memory chips and displays, although the recently launched Galaxy S10 smartphone had solid sales.
Semiconductor saw a drop in memory chip prices as inventory adjustments continued in data centers, while demand for high-density memory for mobile phones increased due to new flagship smartphones. System LSI and Foundry revenue was up on the sale of smartphone application processors (APs).
The Billboard business posted a quarterly loss due to lower demand for flexible displays and increased market availability for large screens.
In the IT & Mobile Communications (IM) division, despite strong sales of the Galaxy S10, mobile business profitability was down year-over-year due to increased competition in the low-end segments. way. In addition, in the face of declining demand across the smartphone market, the redesign of the company's consumer product line has resulted in a drop in sales volume over one year.
Revenues from network activities increased, thanks to the launch of the 5G telecommunication service in Korea. Sales of high-end televisions such as QLED TVs and very large models contributed to the year-over-year earnings growth of Consumer Electronics (CE).
For the second quarter, Samsung expects a limited improvement in the memory chip market, as demand will likely start to improve for major applications such as mobile products, but price cuts will continue probably.
There is increasing demand for CMOS access points and CMOS image sensors in the LSI System and Foundry sectors. For screens, Samsung is expecting an increased demand for rigid panels.
The IM division is expected to focus on flagship products such as the world's first 5G smartphone and consumer mainstream with innovative cameras and display features. The EC division is expected to grow in the second quarter thanks to strong seasonal demand for air conditioners and sales of new high-end televisions.
For the second half of 2019, the Company expects an increase in the demand for memory chips for high density products, but uncertainties persist in the external environment. The display sector is experiencing a new recovery, the demand for flexible screens being expected to increase as a result of the launch of new smartphones.
Growing competition in mature TV and smartphone markets is likely to be a challenge for the second half, and Samsung will focus on strengthening its leadership in the premium segment.
In the medium and long term, the company aims to strengthen the competitiveness of key businesses by diversifying applications and offering innovations in components and new form factors for devices. Samsung will also continue to expand its capabilities in automotive technology, leveraging HARMAN solutions and artificial intelligence.
In the first quarter, Samsung Electronics' capital expenditure was KRW 4.5 trillion, of which KRW 3.5 trillion was spent on semiconductors and KRW 0.3 trillion on screens.
Semiconductor Finds 2H Demand Improvement Despite Uncertainties
The Semiconductor business reported consolidated revenues of KRW 14.47 billion and operating profit of KRW 4.12 billion for the quarter.
Overall, memory activities have seen demand for NAND and DRAMs steadily decline due to macroeconomic uncertainties, low seasonality and inventory adjustments at data center companies. This weakness was partially offset by the increasing adoption of high-density mobile memory products and the launch of flagship smartphones.
In the second quarter, the global memory market is expected to remain sluggish in a period of low seasonality, although the company expects demand for some applications to improve gradually.
For NAND, the demand for high density SSDs such as All-Flash-Array is expected to increase, while high-end smartphone launches of 256GB and more storage are expected to keep demand steady in the second quarter. For the second half of the year, demand for NAND is expected to grow in major applications as a result of lower prices. Samsung will seek to actively generate new demand while meeting customer demand for high-density memory, while boosting cost competitiveness by developing the fifth-generation V-NAND offering.
For DRAMs, the demand for servers is likely to increase among data center companies with lower inventory levels as of the end of the second quarter. There is an increase in PC demand, while the adoption of high density in new models of smartphones should help meet the demand for mobile DRAM. The company plans to actively meet the demand for differentiated high-end products, such as LPDDR4X for mobile devices, while focusing on the transition to 1Y nm in major applications.
For the second half of the year, demand for DRAM is expected to increase due to seasonal effects, despite persistent uncertainties. In addition, the demand for high-density products for servers and mobile products is expected to remain strong due to the increasing adoption of new processors in servers and the trend toward high density in the mobile. Samsung plans to flexibly manage its capacity and strengthen its competitiveness by increasing the production of 1Y nm products.
For the System LSI division, despite slowing demand for image sensors due to the low seasonality of smartphones, profits improved in the first quarter thanks to the increased supply of access points and modems. The company has also successfully marketed the world's first 5G chipset solution.
In the second quarter, the company's earnings are expected to improve slightly as demand for DDI image sensors and sensors picks up and the demand for 5G chipsets increases. In the second half, despite weak demand, smartphone manufacturers should continue to adopt high specification components. Samsung plans to expand its range of image sensors and 5G chipset solutions to meet the demand for high-end mobile phones. It also plans to diversify its product offerings with sensors and 3D chips / screen fingerprints for automotive and IoT applications.
For the foundry sector, profits stagnated due to the stagnation of the smelter and the low seasonality of the smartphone market. The company began serial production of 5G and IoT mobile products by adopting the eMRAM process and obtained new orders for computer chipsets via the 8nm FinFET process.
In the future, Samsung intends to strengthen its competitiveness by solving the 6-nm EUV process and completing the development of the 5-nm process. In the second half, based on mass production of the EUV 7 nm process, the company will focus on the development of the EUV 4 nm process and the next-generation architecture.
The display shows a moderate improvement in the 2nd quarter
Billboards posted consolidated sales of KRW 6.19 billion and an operating loss of KRW 0.56 billion in the first quarter. It recorded an operating loss due to lower profitability of mobile screens and large screens.
Mobile displays have experienced slower demand and increased competition with LTPS LCDs. Large screens also suffered from the continued decline in LCD TV prices due to the low seasonality.
For the second quarter, Samsung expects a limited improvement in its profits, as the demand for flexible displays is likely to remain low. The company will focus on improving results by increasing rigid OLED sales and offering differentiated products integrating new technologies such as Infinity Display and fingerprinting on the market. 39; display.
For large screens, the company anticipates increasing demand for value-added products such as large-scale and high-resolution television screens in the second quarter, although supply concerns persist. It will focus on actively responding to demand for its core products, providing differentiated technology and improving the cost structure.
In the second half, the demand for flexible OLED panels for smartphones is expected to rebound, but pressure on LCD panel prices will persist. In these circumstances, Samsung will actively respond to the demand of major smartphone customers and expand its OLED business scope with new applications.
In the case of large screens, despite the uncertainties associated with capacity extensions in the liquid crystal display sector, the company expects the demand for high-end television screens to continue to grow, in particular UHD, 8K and ultra-large TVs. In response, it will strive to improve profitability by focusing on value-added products.
Mobile supported by Strong Galaxy S10 Sales
The IT & Mobile Communications division achieved consolidated revenues of KRW 27.2 trillion and operating profit of KRW 2.27 billion for the quarter.
Global demand for the smartphone market has declined quarter-on-quarter as the industry has entered a period of low-season, but Samsung has announced a quarterly increase in its sales revenue thanks to solid sales of Galaxy S10.
However, growth in smartphone sales has been limited as previous models' sales have dropped due to the reorganization of the low-end product line. The increase in expenses related to the adoption of high-end features, marketing and the overhaul of the range weighed on profitability. The results of the Networks business also increased thanks to the commercial launch of 5G in South Korea.
In the second quarter, with continued weak seasonality, market demand for smartphones is expected to increase slightly quarter on quarter. Samsung will strengthen its product line with innovations such as the Galaxy S10 5G and the Galaxy A80 and the ongoing reorganization of its product offering.
For the second half, despite increased competition in the market, Samsung expects an increase in smartphone sales, driven by new models in all segments, from the Galaxy A series to the Galaxy Note, in a context of strong seasonality. In the high-end segment, the company will strengthen its leadership with the new Galaxy Note and innovative products such as 5G and foldable smartphones. Samsung also aims to secure profitability by improving profitability.
In the networking segment, Samsung will strive to maintain a strong performance in the second quarter with respect to the commercialization of 5G and the expansion of LTE networks abroad. In the second half of the year, the company will continue to expand its LTE networks globally and provide 5G hardware to markets such as South Korea and the United States.
Consumer Electronics targets high value products for growth
Consumer electronics, which includes the visual display and digital device business, recorded a consolidated business figure of 10.04 billion KRW and a profit of 30%. operating income of KRW 0.54 billion for the first quarter of 2019.
Visual screen sector sales dropped by QoQ as the global TV market entered a low season, but it grew year-over-year due to the rapid adoption of new models. The expansion of premium product sales has helped Samsung consolidate its position as a global leader in premium TVs and very large screens.
TV demand in the second quarter is expected to weaken slightly due to slowing demand from emerging markets. Sales should also decrease from the previous year due to the lack of global sporting events this year. The company will seek to improve its results by further developing sales of high value-added products such as QLED TVs and by putting forward the introduction of new models.
For the digital home appliance sector, despite the slowdown in global demand, domestic market growth has been strong, with demand focusing on new lifestyle appliances such as clothing coolers and air purifiers . For the second quarter, the company plans to improve its performance by strengthening sales of air conditioners, which should experience peak demand due to the summer season.
In anticipation of the second half of 2019, the television market is expected to grow slightly over the year despite global economic challenges. Demand for household appliances is also expected to increase compared to the first half, as political tensions around global trade are easing.
※ Consolidated revenue and operating income by segment based on K-IFRS (2016 ~ 2019 1Q)
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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