Samsung Electronics warned that first quarter profits declined nearly 60 percent compared to last year, brought on by weakness in displays and its memory chip unit.
CNBC, citing the company, reported Samsung said operating profit for the March-ending quarter will be about 6.2 trillion Korean won or $5.5 billion, which is down from the 15.64 trillion won Samsung was able to post for the first quarter of 2018. Analysts, according to CNBC, had expected Samsung Electronics to weigh in with profit of 6.8 trillion won. The company will report the first quarter earnings later in April but released preliminary results Friday (April 5). Sales for the first quarter are expected to be about 52 trillion won, which CNBC noted is 14 percent lower than year-earlier.
Shares fell slightly but there was no bloodletting in large part because investors were bracing for profits to decline during the first three months of 2019. Samsung had warned about it in March, saying in a regulatory filing at the time that it was seeing a larger than expected price decline for memory products because of seasonal weakness. Samsung pointed to a decline in data center companies purchasing memory chips and sluggish smartphone sales for the declines. It’s not only Samsung that’s feeling the chip pain. CNBC noted experts said the entire semiconductor industry is dealing with excess inventory amid waning demand.
The bad news for the first quarter isn’t likely the end of it for Samsung. Sanjeev Rana, an analyst at CLSA, told CNBC that earnings at Samsung are poised for further reductions in the coming quarters. “I think this earnings decline will continue for the time being, especially on the memory side,” the analyst told CNBC. “We expect 2Q (second quarter) to be the profit trough for memory earnings for companies like Samsung and (SK) Hynix.”
As for Samsung’s display business, the company had already warned LCD panel prices declined more than expected due to an increase in capacity from Chinese rivals. At the same time, demand for its OLED display screens also fell.