On 23 March, KOREAN electronics components companies, including SK Hynix and LG Display, will announce their first quarter results. (Photo by Pixar Bay)
With the spread of new coronavirus infections worldwide, the awning season is approaching the first results of this year’s performance by korean electronics companies. The first quarter of this year’s results are expected to be a spectator’s point of view of how the slowdown in demand in the forward industry caused by Corona19 has hurt the companies involved.
According to the Financial Supervisory Service’s electronic disclosure system on 14 July, Samsung Electronics and Samsung Display will announce their first-quarter consolidated results, starting with SK Hynix and LG Display on 23 Rd.
The securities industry believes that SK Hynix, LG Display, Samsung Electronics and Samsung Display both performed well in the first quarter, beating market expectations.
In a recent report, The Korea Securities Company said, “Semiconductors have increased demand for data center servers amid weakening demand for mobile-oriented DRAM, and price details have led to a total improvement in business conditions,” adding, “The display industry is directly affected by demand for b2C (transactions between companies and consumers) such as TVs, smartphones, monitors, and laptops, so a downward trend in performance is inevitable. Samsung Electronics (including Samsung Display), SK Hynix and LG Display are expected to lower operating profit compared to consensus (average earnings).
■ Semiconductor and server market to offset stagnation in mobile demand as Corona 19 stagnates
On July 7, Samsung Electronics announced that it had recorded 55 trillion won in sales and 6.4 trillion won in operating profit in the first quarter. The results of each segment, including the semiconductor business, will be revealed through the consolidated base results announcement scheduled for 29 June, and the performance of the semiconductor business is expected to exceed KRW 16 trillion in sales and 3.8 trillion won in operating profit.
This represents a 10.56% increase in year-over-year sales and a 7.81% decrease in operating profit. Compared to the previous quarter, sales decreased by more than 4.72%, and operating profit increased by more than 10.24%.
“The increase in equipment investment by global server and network companies, the reflex profit of Corona 19, the demand for server-oriented semiconductors increased, and the price increase exceeded expectations,” said Lee Su-bin, a researcher at Daewoo Securities, adding, “Samsung Electronics’ first quarter semiconductor business segment forecasts dram bitgross (bit-per-unit shipment growth rate) to -8%, ASP (average sales price) by +4%, NAND bitgrosse -5%, and ASP +5%. The Corona 19 impact sluggish server, smartphone and PC sectors in China in q1, but the DRAM ASP was boosted by improved supply and demand.”
SK Hynix’s first quarter results are expected to be KRW 6.8205 billion and operating profit of KRW 466.4 billion, based on the performance consensus predicted by securities information company F&Guide. This represents a 0.71% increase in year-over-year sales and a 65.87% decrease in operating profit. Compared to the previous quarter, sales decreased by 1.54% and operating profit increased by 97.63%.
Although samsung electronics has a similar performance trend in the semiconductor business, the NANDFLASH business is expected to have a deficit of more than KRW 400 billion, unlike Samsung Electronics (forecast 1 trillion won in operating profit).
“SK Hynix has a great exposure to servers and PCs due to the nature of the front industry,” said Kim Kyung-min, a researcher at Hana Financial Investments. Pc-oriented DRAM shipments are estimated to be 49%, exceeding mobile DRAM shipments (38%).
■ Display, corona 19 due to ‘smartphone · TV’s ‘blow’, the insatiable
Samsung Display’s first quarter results are expected to generate more than KRW 5 trillion in sales and a operating deficit of more than KRW 400 billion. This is a decrease of 18.03% compared to the previous year, and operating profit increased by about 200 billion won in deficit. Compared to the previous quarter, sales decreased by 38.27%, and operating profit shifted from a 200 billion won surplus to a deficit.
Researcher Lee Su-bin said, “The corona 19 impact is expected to reduce demand for display (LCD+OLED) while the production and sales of finished products centered on smartphones and TVs have been sluggish, and the share of OLED panels for smartphones (Samsung Display) is 89% of sales, and corona 19 is the largest business segment.”
“The global smartphone market (sales volume) in q1 (with Corona 19 impact) is expected to decline by 22% compared to the previous quarter to 290 million units,” he said, adding, “Samsung Electronics’ Galaxy S20 has received positive reviews in hardware, but it is estimated that sales in March were below expectations due to the decline in marketing and event effects due to the corona 19 impact.”
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LG Display’s first quarter results are expected to be KRW 5.170.3 billion in sales and KRW 382.1 billion in operating deficits based on the performance consensus predicted by F&Guide. This represents a 12.05% decrease in year-over-year sales and a decrease in operating deficits of KRW 249.2 billion. Compared to the previous quarter, sales decreased by 19.49%, and operating deficit decreased by 39.8 billion won.
Yi Seung-woo, a researcher at Eugene Investment & Securities, said, “Lg Display’s shipments in q1 are estimated to be 7.9 million㎡, ASP is $542, respectively, down 14% and 11% from the previous quarter.” The degree of demand hitting is likely to increase.”