Samsung Electronics semiconductor production site. (Photo by Samsung Electronics)
Samsung Electronics is expected to record an improved year-on-year performance in the first quarter of this year. However, while the semiconductor business is driving up its performance, the analysis that the impact of the new coronavirus infection (Corona19) on the set business was very limited, and the outlook for second quarter results is focused.
According to the industry on 20 March, Samsung Electronics will announce the final results of its business segment in the first quarter on 29 March. On July 7, Samsung Electronics announced preliminary results that showed sales of KRW 55 trillion and operating profit of KRW 6.4 trillion in the first quarter. This was an increase of 4.98% and 2.73% year-over-year, respectively.
Db Financial Investment’s Interim Results said, “The impact of the slowdown in demand due to Corona 19 since March has had a very limited impact on set sales volumes such as smartphones and TVs,” and “Due to strong server demand and mobile DRAM inventory accumulation demand, dram and NAND shipments in q1 are believed to have improved semiconductor performance while meeting expectations.”
However, the company is in the mood to welcome the first quarter’s earnings. The corona 19 impact began to be reflected in earnest in mid-March, but in the second quarter, the company is expected to hit the entire business sector, excluding semiconductors, in line with the global spread.
A Samsung Electronics official said, “There is virtually nothing that reflects the corona in the first quarter results,” adding, “We are focusing on discussions about countermeasures as concerns grow about the overall business in the second quarter due to the actual corona.” The situation in q2 is very worrying, which means that we cannot afford to look at the first quarter’s performance.
The Device Solutions (DS) sector is expected to record operating profit of KRW 3 trillion. Although the semiconductor sector recorded an operating profit of 4 trillion won in the second half of the year (KRW 4.12 trillion), which is not significantly different from the previous year, the display sector is expected to record operating losses of 300 billion to 500 billion won. The semiconductor sector is said to have outperformed dram and NAND bit growth due to increased demand for untapped (non-face-to-face) solutions. The non-memory semiconductor sector was also good at selling the Galaxy S20. The display appears to have recorded a operating deficit due to the sluggish liquid crystal display (LCD) sluggishness and rigid organic light emitting diode (OLED) utilization rate decreases, and the decrease in flexible OLED volume.
“Samsung Electronics is estimated to have achieved a good level compared to the price increase in memory semiconductors in q1,” said No Geun-chang, a researcher at Hyundai Motor Securities, “Solid State Drive (SSD) for servers, which has increased trading ship preferences due to its high technology compared to its North American competitors, and mobile DRAM appears to have increased in price due to the pre-emptive launch of THE LP5x, although the lp DDR4x price declined compared to the previous quarter.”
The IT and mobile (IM) sector in charge of the mobile phone business is estimated to have recorded an operating profit of 2 trillion won, up slightly from 2.27 trillion won in the previous year. During this period, Samsung smartphone sales were reportedto be around 60 million units. Corona 19 influence and lack of marketing led to a slowdown in sales of the flagship Galaxy S20 and delays in the launch of the mid-priceD Galaxy A, but operating profit margins improved. Corona 19’s reduced marketing has reduced costs and eased competition from competitorS Chinese companies and Apple’s production cuts.
Galaxy S20 Ultra. (Photo by Cnet)
The consumer electronics (CE) sector is expected to record operating profit of 400 billion to 500 billion won, which was similar or slightly lower than the previous year (KRW 540 billion). It is also believed that tv and household appliances were affected by the limited Corona 19. IBK Investment & Securities estimates that both Samsung Electronics’ VD division sales and TV sales decreased by 40% compared to the previous quarter, and consumer electronics sales decreased by approximately 13% in the same period. Instead, the company saw an increase in online sales of premium appliances, although shipments decreased due to sluggish TV demand. Corona 19 has been affected by improved sales of sanitary appliances such as air purifiers and dryers, as well as production disruptions for Chinese manufacturers.
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Lee Seung-woo, researcher at Eugene Investment & Securities, said, “In the second quarter, Samsung’s set division was burdened with increased inventory due to sluggish cellouts and marketing costs to relieve it. The deterioration of profit and loss in the CE sector is inevitable.”