Profits Slump At Samsung Due To Chip Sale Slowdown

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Better times ahead predicts South Korean electronics giant after profits take a hit in the first quarter

Samsung Electronics has shocked markets after it unveiled a dramatic fall in both sales and profits, but it has said things will improve in the coming quarters.

Samsung’s financial performance has been impacted by a decline in revenues from memory chip and smartphone sales.

Samsung is of course in the middle of dealing with fallout from its Galaxy Fold, after a number of tech reviewers encountered problems with its folding screen. It has now delayed the official launch of the tablet-smartphone hybrid.

The Galxy Fold. // Samsung

Slumping profits

But it is clear this Galaxy Fold problem did not impact Samsung’s latest financial performance.

For the first quarter Samsung posted an overall net profit of KRW 5.04 trillion, down from KRW 11.69 trillion in the same year-ago quarter.

This is Samsung’s weakest profit in nearly two years.

There was equally bad news on the revenue side, after overall sales fell 13.5 percent to KRW 52.4 trillion from KRW 60.56 trillion a year ago.

The decline has been attributed to falls in chip prices and slowing demand for display panels, and the firm said that there could be more short-term pain the second quarter due to a further decline in the price of memory chips.

“For the second half of 2019, the company expects memory chip demand for high-density products to increase, but uncertainties in the external environment will persist,” Samsung said. “A further recovery is seen for the Display Business as demand for flexible screens is set to rise on new smartphone launches.”

Samsung also said that its memory business saw demand for NAND and DRAM steadily weaken amid macroeconomic uncertainties, weak seasonality and inventory adjustments by data centre firms.

On the mobile side Samsung said there had been solid sales of its Galaxy 10 smartphone.

However, growth in smartphone shipments was limited “as sales of previous models fell due to a lineup reorganization of mid- to low-end products.”

ASML row

It has been a bit of a torrid time for Samsung of late.

Earlier this month Samsung was forced to issue a denial after it was dragged into the row surrounding intellectual property theft from Dutch chipmaker ASML.

Samsung was dragged into the row, after ASML CEO Peter Wennink, who had initially denied some Dutch media reports that the Chinese government had been behind the theft, then went to state that funding for Xtal had come in part from China and in part from Korea.

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Author: Tom Jowitt
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