Chips are seriously down for Samsung as profits slump 60pc

1 May 2019

Galaxy Fold. Image: Samsung

Samsung’s hopes hinge on future resurgence in demand for phones, chips and displays.

South Korean tech giant Samsung has reported its weakest profit in years after unexpected declines in its memory chip and display businesses.

Samsung Electronics posted 52.4trn won ($44.9bn) in consolidated quarterly revenue and 6.2trn won ($5.4bn) in quarterly operating profit.

This is the weakest profit performance since the company’s phone debacle with the Note 7 in 2016. In a throwback to the fiery phone crisis, Samsung recently had to recall review units of its forthcoming Galaxy Fold foldable smartphone after tech journalists reported the screen warping or the device not working if a protective display cover was accidentally removed.

At least we have the memories

“First-quarter earnings were weighed down by the weakness in memory chips and displays, although the newly launched Galaxy S10 smartphone logged solid sales,” Samsung said in a statement.

It attributed the drop in semiconductor revenues to 14.47trn won to inventory adjustments by data centres while new smartphones helped to increase demand for high-intensity memory.

Samsung said that its display panel business reported losses due to decreased demand for flexible displays and increasing market supplies for large displays.

“In the IT and Mobile Communications (IM) Division, despite solid sales of the Galaxy S10, profitability in the mobile business declined year on year [YOY] as competition intensified in the low- to mid-range segment. In addition, amid softer demand in the overall smartphone market, revamping of the company’s mass-market line-up led to a YOY decrease in sales volume.”

Samsung said that overall market demand for smartphones decreased quarter on quarter as the industry moved into a seasonally weak period.

“Looking ahead to the second quarter, as weak seasonality continues, market demand for smartphones is expected to increase slightly quarter on quarter. Samsung will strengthen its product line-up through innovations such as Galaxy S10 5G and Galaxy A80, and continued reorganisation of its product offerings,” the company said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years