In line with its heads-up, Samsung Electronics on Friday unveiled its most humble three-month earnings since the third quarter of 2016 for the first quarter ended March with its operating profit at 6.2 trillion won, down whopping 42.6 percent on quarter and 60.4 percent on year.
The world’s largest chip and smartphone maker in its earnings guidance estimated sales shrank relatively more modest 12.3 percent on quarter and 14.1 on year to 52 trillion won to imply the toll on the bottom line from a sharp deterioration in selling prices of its mainstay memory chips from the boom period over the last two years.
The first quarter results were below the market’s consensus of an operating profit of 8.0 trillion won on sales of 53.6 trillion won, and yet won’t likely upset the market greatly as the company late last month issued a rare statement warning investors of poor first-quarter performance due to steeper-than-expected fall in mainstay DRAM prices.
PC and server DRAM prices are estimated to have plummeted by nearly 30 percent in the first quarter of 2019 and DRAM average selling prices down 20 percent, according to DRAMeXchange last month. The industry had expected a drop of 10 percent in the quarter, but oversupply, inventory levels, and trade war between the U.S. and China had worsened the market conditions, it added.
When confirmed later this month, Samsung Electronics would have performed its worst since the third quarter of 2016 when it posted 5.2 trillion won in operating profit on sales of 47.82 trillion won.
Samsung Electronics which enjoyed two bumper years from a chip boom inevitably bore the dent as the industry entered a bust phase. Last year, semiconductors contributed to more than 70 percent of its operating profit for the company that also produces phones, TVs, and electronic appliances.
But given the inevitable need for memory to fuel big data and smart technologies in the digital age, most industry watchers predict the correction won’t last long. Samsung Electronics also predicted a pickup from the second quarter as industry majors have all begun to moderate output to aid prices.
The company also expects impetus from the 5G migration to further bolster sales of its anniversary phones Galaxy S10 series and Galaxy Fold.
Samsung Electronics will be releasing final and detailed statements later this month.