News ID: 219114
Published: 0854 GMT July 31, 2018

Samsung Electronics' net profit down 0.09%

Samsung Electronics' net profit down 0.09%
Samsung Electronics chip production plant in Giheung (YONHAP)

Samsung Electronics Co. said Tuesday its second-quarter net profit edged down 0.09 percent on-year amid weak returns from the smartphone business, although the chip business posted another quarterly record profit.

Net profit came to 11.04 trillion won ($9.8 billion) in the April-June period, compared with 11.05 trillion won posted a year earlier, Samsung said in its regulatory filing, Yonhap reported.

Operating profit came to 14.87 trillion won, up 5.71 percent from the previous year. Sales edged down 4.13 percent to 58.48 trillion won.

It marked the first time in five quarters for Samsung to post sales below 60 trillion won. The operating profit also fell 4.94 percent on-quarter, which marks the first decline in seven quarters.

The announcement came in line with the guidance report released earlier this month.

Samsung Electronics said its chip business posted an operating profit of 11.61 trillion won, rising a sharp 44 percent from 8.03 trillion won posted a year earlier.

The second-quarter operating profit for the chip business was an all-time high, beating the previous record of 11.5 trillion won posted in the first quarter of 2018.

Samsung said it was able to maintain growth for the division despite weaker demand for smartphones due to the rising orders from data center operators.

"For NAND, demand remained robust on the back of the continuing trend toward higher density for smartphones and the increase in demand for server SSD due to expansion of cloud infrastructure. Samsung posted solid earnings by responding to new mobile device launches and demand for higher density products," the company said.

"For DRAM, server demand stayed strong owing to the ongoing shift to higher density and expansion of data center infrastructure. In the mobile market, despite concerns over a slowdown in smartphone growth, increase in memory content per device continued," it added.

As for the second half of 2018, Samsung said it expects the sales to increase on the back of rising demand for mobile application processors and image sensors.

"Samsung will also strengthen its process technology leadership by beginning eight-nanometer mass production and EUV-based seven-nanometer test production," it added.

With the chip business accounting for a whopping 78.1 percent of the combined operating profit in the second quarter, however, industry watchers said Samsung should do more to ease such a heavy dependency.

The display panel business posted an operating profit of 140 billion won, falling sharply from 1.7 trillion won posted a year earlier and from 410 billion won posted a quarter earlier.

"For OLED, earnings decreased quarter-on-quarter despite improved factory utilization for rigid products, as demand from major customers for flexible panels remained slow," the company explained.

"Earnings from LCD also declined from the previous quarter as the shipment and average panel price continued the downward trend," it added.

The IT and mobile division, which oversees the smartphone business, posted an operating profit of 2.67 trillion won, falling 34 percent from 4.06 trillion won tallied a year earlier.

Samsung attributed the weak sales from the IT and mobile business to weak sales of flagship models, such as the Galaxy S9, along with increased marketing expenditures. The company also claimed that intensified global competition affected its performance.

Local analysts estimate the second-quarter shipment of the Galaxy S9 at eight million units, with the combined sales of 2018 reaching 28 million units.

If the estimate is realized, the Galaxy S9 would become the worst performing S-model since the Galaxy S3 in 2012.

The shipment of the Galaxy S8, released in 2017, came to 37.5 million units on its first year, while that of the Galaxy S7 hit 48.5 million units in 2016.

It predicted that the market for smartphones and tablet PCs in the second half will remain a challenge despite the rise in seasonal demand.

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