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Both electronics giants see diminished Q1s

May 02,2019
Samsung Electronics reported the worst earnings in more than two years due to falling memory chip prices. LG Electronics saw revenue tumble, largely due to poor smartphone sales.

Samsung on Tuesday reported 52.4 trillion won ($47 billion) in sales and 6.2 trillion won in operating profit in the first quarter - the worst profit performance in more than two years. The company’s operating profit nosedived 60 percent year on year while sales retreated 14 percent in the same period.

Weak memory chip prices and low demand for displays were major factors in the company’s worst performance since the third quarter of 2016.

Samsung’s semiconductor business posted 4.12 trillion won in operating profit while its display unit posted a 560 billion won operating loss. The company’s IT & mobile communications business posted 2.27 trillion won in operating profit, and its consumer electronics unit saw 540 billion won in operating profit.

Samsung is the world’s largest producer of dynamic random access memory (DRAM) and NAND flash chips. It is also a major supplier of OLED display panels. Its clients include Apple.

Samsung’s poor performance was largely expected thanks to a preliminary earnings report released last month.

“The overall performance of the memory business retreated due to the continuous fall in memory chip prices and weak demand due to our clients’ inventory adjustments,” said Samsung in a statement Tuesday. “As for the display business, weak demand and falling prices for panel displays resulted in the loss.”

Samsung expects demand for memory chips to increase in a limited way in the second quarter. It forecasts demand for high-density memory products to improve in the second half of this year.

In a bid to become the world’s top non-memory chip market, Samsung last month announced it will invest 133 trillion won in its non-memory chip business by 2030. The non-memory chip market accounts for 70 percent of the chip business.

Samsung’s smartphones sold well with solid sales of the flagship Galaxy S10. The company said it sold 78 million smartphones and five million tablets in the first quarter, and expects the strong sales to continue in the second quarter.

In the first quarter, Samsung held onto its spot as the world’s top smartphone producer in terms of shipments, according to a Wednesday report from industry tracker Strategy Analytics. Samsung shipped 71.8 million smartphones compared to 78.2 million in the same period a year ago, with its market share standing at 21.7 percent. Huawei followed with 59.1 million units.

For its IT and mobile division, Samsung expects network equipment sales to grow, with the rise in demand from global commercialization of 5G networks as well as an increased demand for LTE networks.

Although not as severe, LG Electronics revenues also fell. In the first quarter, LG’s sales retreated 1.4 percent to 14.9 trillion won while its operating profit slid 18.7 percent to 900.6 billion won.

LG’s mobile communications division posted a 203.5 billion won operating loss. That division has been posting losses for four years.

The amount of the loss, however, was down 36.1 percent compared to the previous quarter, according to the company.

LG hopes it can recover in the second quarter with the release of its 5G-enabled smartphone, the LG V50 ThinQ, despite its lukewarm reviews amid the introduction of other smartphones like Samsung’s Galaxy Fold and Huawei’s Mate X.

LG, however, posted record sales and operating profit for its home appliance department.

Operating profit for LG’s home appliance and air solution unit jumped 30.5 percent on year to 727.6 billion won, thanks to the popularity of some premium home appliances. Its sales stood at 5.47 trillion won, an 11 percent increase from a year earlier.


BY JIN MIN-JI [jin.minji@joongang.co.kr]


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