Samsung Electronics's operating profits are rising, along with LG's. Photo: iStock

Samsung Electronics’ first-quarter operating profits were down 60% to its lowest level in two years due to weaker demand for memory chip and display panels, the company announced on Friday.

Estimated consolidated sales for the first quarter of 2019 were 52 trillion won (US$45.7 billion), down 14% from last year. The company’s operating profit is expected to be 6.2 trillion won (US$5.45 billion) in the first quarter, down 60% from the previous year.

Samsung attributed the weaker than expected results to a poor business environment for the display and memory chip sectors.

Samsung Electronics announced its adjusted outlook to cushion the market from the shock of the company’s poor performance.

Display panel prices fell as Chinese rivals increased their supply in the LCD panel market amid slowing seasonal demand, the company said. “Demand for large size flexible OLED (0rganic light emitting diodes) decreased and prices dropped due to competition from LTPS (low-temperature polycrystalline silicon) LCDs.”

Sector analysts say Samsung earnings forecasts are trending down. “It’s harder to forecast chip makers’ earnings than before as it is more difficult to figure out the demand for DRAMs from server makers than that from mobile equipment manufacturers and computer makers,” an industry analyst told Asia Times.

Server makers have recently become the primary customers for DRAM manufacturers.

“General expectations were that Samsung’s earnings would bottom out in the second quarter of this year,” the analyst said, adding that recovery was expected in the third quarter.

Shinyoung Securities analyst Lee Won-sik said: “Samsung Electronics’ performance is expected to recover later this year as seasonal demand for IT products increase.”

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