Samsung Electronics Co. on Thursday reported its worst quarterly profit in 14 years, as global economic woes dented demand for consumer electronics and a chip glut battered its core business.
The world’s largest memory chip and smartphone maker reported operating profit of 640.2 billion won (US$478 million) during the January-March period, falling 95 percent from the 14.12 trillion won it posted a year ago.
Its first-quarter net income came to 1.57 trillion won, down 86.1 percent from a year earlier. Sales fell 18 percent to 63.74 trillion won.
Samsung’s Device Solution (DS) division, which oversees its chip business, posted a deficit of 4.58 trillion won, in its first financial loss in 14 years, with chip inventories growing significantly amid tapering global demand.
The last time Samsung saw its core unit making losses was the first quarter of 2009, when the world was emerging from the 2008 financial crisis.
Samsung blamed the poor results on “weak demand,” “a decline in utilization rates in the foundry business” and “inventory adjustments from customers.”
Earlier this month, Samsung said it was cutting memory production “to a meaningful level,” in a sharp departure from its previous position that it would not artificially reduce output as part of efforts to gain a bigger market share.
Its smaller rivals like SK hynix and Micron had moved several months earlier than Samsung did and pulled back on production in order to ease a severe supply glut that drove down prices.
Market tracker TrendForce said early this year it would take “several quarters of inventory adjustments” and “larger production cuts” by major chipmakers to digest the excessive supply that plagued the industry, and to leave behind the downturn phase.
Samsung forecast the global chip market will shrink 6 percent on-year to $563 billion this year and warned of difficult conditions continuing throughout the year.
Given the circumstances, the company said it will focus on advancing “technological competitiveness, including the gate-all-around based 2-nanometer process, while meeting demand for DDR5, LPDDR5x and other high-end products” in coming months.
Its Device eXperience (DX) division, which oversees smartphones, TVs, and home appliances, logged improved profits in the first quarter, largely driven by the robust sales of the flagship Galaxy 23 series and premium TVs.
The company said it will work to solidify its leadership in the premium segment, in particular, such as foldable smartphones and Neo QLED screens.
During the first three months of the year, the company’s total capital expenditure reached 10.7 trillion won, up 36 percent from a year ago and a record for a first quarter.
Of the total, 9.8 trillion won was spent on semiconductors and around 300 billion won was spent on display panels.
Spending on memory was concentrated on completing the chip fabrication facilities in Pyeongtaek, 60 kilometers south of Seoul, and foundry investments in global facilities including in Taylor, Texas, “to address demand for advanced nodes,” while “investments in displays focused on infrastructure and module production enhancements,” it said.
Samsung said the Korean won’s strength against the U.S. dollar and euro negatively affected the bottom line by about 700 billion won.
Source: Yonhap News Agency