Samsung profit lags estimates on chips, smartphones

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Updated: April 30, 2019 8:27:57 AM

Operating profit was 6.23 trillion won, Samsung said, confirming preliminary numbers released earlier this month. Sales were 52.4 trillion won.

Samsung shares closed Monday at 46,150 won.

Samsung Electronics Co. posted profit that missed recently reduced analysts’ estimates, the latest setback for a technology giant grappling with falling memory-chip revenue and the delay of its first foldable smartphone.

Net income fell to 5.11 trillion won ($4.4 billion) in the three months ended March, the Suwon, South Korea company said in a filing on Tuesday. That compares with the 5.7 trillion won average of estimates compiled by Bloomberg. Shares slipped about 1 percent in Seoul trading.

The slowing expansion of data centers around the world has hurt demand for Samsung’s memory, while Chinese competition has eaten into its smartphone business. Earlier this month, plunging chip sales led Samsung to report its worst operating profit in years, and the company indefinitely postponed the release of the Galaxy Fold after reports of screen failures. Samsung now predicts improvement in the second half of the year as customers work through inventory issues and shift to higher-capacity chips.

“There’s no clear sign yet that demand for memory chips is picking up, even though the second half should be better than the first,” said Lee Jae-yun, an analyst at Yuanta Securities Korea Co. “It’ll be two to three years before the foldable-phone technology becomes reliable enough to open up a whole new market, so the delay of the foldable phone shouldn’t affect Samsung’s fundamentals significantly.”

Operating profit was 6.23 trillion won, Samsung said, confirming preliminary numbers released earlier this month. Sales were 52.4 trillion won.

Samsung shares closed Monday at 46,150 won. They had gained 19 percent this year through Monday’s close after sliding 24 percent in 2018.

Income from the chips unit still accounted for 4.12 trillion won and most of the company’s profits. Contract prices for 32-gigabyte DRAM server modules, used to store data on PCs and servers, fell by 38 percent in the March quarter, according to InSpectrum Tech Inc. Prices for 128-gigabit MLC NAND flash memory chips, which store data on mobile devices, dropped by 23 percent.

SK Hynix Inc., a rival South Korean maker of memory chips, said last week that it was seeing clear signs of recovery starting in the second quarter. Together with Hynix and Micron Technology Inc., Samsung controls the bulk of the market for DRAM, or dynamic random access memory.

“There are signs that the smartphone market is coming back to life,” said Song Myung-sup, an analyst with HI Investment & Securities Co. “Add to that expectations for a large stimulus for tech industries in China and the potential resolution of the U.S.-China trade dispute and you are seeing a better second half for Samsung.”

Samsung’s mobile division posted 2.27 trillion won in operating income. While the company remains the world’s biggest phone maker, its share of the market has been shrinking as Chinese rivals Huawei Technologies Co. and Oppo catch up.

The display division lost 560 billion won for Samsung, which supplies OLED screens for Apple’s iPhones. Samsung’s consumer electronics unit, which includes TVs and appliances, recorded profit of 540 billion won.

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