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(2nd LD) Samsung expects weak results after solid Q1 performance on chip biz

All News 09:53 April 29, 2020

(ATTN: RECAST headline, lead; ADDS more info from 6th para, 2nd photo; UPDATES throughout)
By Joo Kyung-don

SEOUL, April 29 (Yonhap) -- Samsung Electronics Co. on Wednesday delivered a solid first-quarter earnings performance on the back of its chip business despite the coronavirus outbreak, but its bottom line will be hurt in the current quarter by fallout from the pandemic.

The world's leading memory chip and smartphone manufacturer said its operating income increased 3.43 percent on-year to 6.4 trillion won (US$5.2 billion) in the January-March period, and sales rose 5.61 percent on-year to 55.3 trillion won.
However, its net profit declined 3.15 percent to 4.8 trillion won over the cited period.

The figures were in line with the earnings guidance announced earlier this month that beat the market consensus.

Samsung's solid performance was led by its semiconductor business, as increased demand for server chips used for data centers and the steady rise of memory chip prices helped the company stay afloat amid the novel coronavirus crisis.

This photo, taken on April 7, 2020, shows the outdoor signage of Samsung Electronics Co. at its office building in Seoul. (Yonhap)

Revenue from the semiconductor division stood at 17.64 trillion won in the first three months of 2020, a 21.9 percent increase from a year earlier. Its operating profit from the business division declined 3.1 percent on-year to 3.99 trillion won but was higher than the fourth quarter.

"The memory business saw solid demand in the period, despite weak seasonality and the effects of COVID-19, thanks to continued investments in 5G infrastructure and increased demand from cloud applications related to remote working and online education," Samsung said.

According to industry tracker DRAMeXchange, the average contract price of 8-gigabit DDR4 DRAM, a benchmark price for the category, reached $2.94 in March, up 2.1 percent from a month earlier, extending its price hike to a third consecutive month.

The average price of 32-gigabyte server DRAM was $121 as of end-March, up 4.3 percent from a month ago, according to DRAMeXchange, while the price of 128-gigabit 16Gx8 MLC NAND flash was $4.68 last month, up 2.63 percent from a month ago.

Samsung's mobile business also had a better-than-expected first quarter earnings result despite weakening sales.

Its mobile business unit posted sales of 26 trillion won, down 4.4 percent from a year earlier, but operating profit jumped 16.7 percent on-year to 2.65 trillion won.

This photo, provided by Samsung Electronics Co., shows the company's chip plant in Hwaseong, south of Seoul. (PHOTO NOT FOR SALE) (Yonhap)

The company attributed its profit increase in the mobile business to an improved product mix with the launch of its flagship smartphone line, the Galaxy S20 series, and efficient management of marketing expenses.

Samsung's display panel business was still in red, but it narrowed down its operating loss to 300 billion won from 560 billion won a year ago. Its sales jumped from 6.12 trillion won to 6.59 trillion won in the first quarter.

"Mobile displays posted a decline in earnings amid weak seasonality and lower sales in China due to COVID-19-related shutdowns, while losses narrowed in the large panel business," the company said.

Its home appliance business division posted weak earnings. Its sales increased from 10.04 trillion won to 10.30 trillion won in the first quarter, but operating profit dropped from 540 billion won to 450 billion won over the same period.

The company blamed weaker seasonality and impact from COVID-19 for its lower earnings in the sector.

For the second quarter, Samsung said it expects the memory chip business to stay solid, but its overall earnings are likely to decline due to the fallout from the COVID-19 crisis.

In the first quarter, Samsung's capital expenditure totaled 7.3 trillion won, including 6 trillion won spent on semiconductors and 800 billion won on displays.


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