World’s top memory chipmaker sees tough conditions in coming quarter


Samsung Electronics Co. said Friday it logged 2.95 trillion won ($2.7 billion) in net profits for the first quarter of this year amid globally weak demand for flat panels and TVs sets. It is a 33 percent decline from the same period last year and it is the lowest operating profit in seven quarters.

Its sales stood at 36.99 trillion, up 7 percent from the previous year, the company said in a regulatory filing.

Samsung Electronics blamed mostly the reduced profitability and prices of liquid crystal panels, which account for up about one-fifth of the electronics-maker’s sales.

Compared to last year, panel sales dropped 5 percent. From the previous quarter, they fell 10 percent, while operating profit slipped into the red with a deficit of 230 billion won.

“Sales were lower due to low prices and demand for display panels, and the new manufacturing procedures further compromised production yields,” Samsung Electronics said in a statement.

The company also said global economic uncertainties exacerbated by the Japanese earthquake and rising raw material prices, coupled with a seasonal fall in demand, were responsible for the lackluster performance.

The semiconductor business, however, remained robust and accounted for more than half of the company’s total operating profit.

The growing global demand for smart devices such as smartphones and tablet PCs appeared to be a boon for business, Samsung said, trying to dispell concerns about the reported pile of Galaxy Tab tablets in inventory stock.

Apple Inc. depends on Samsung for half of its mobile DRAM needs and also half of its NAND memory demand.

Samsung’s mobile division recorded a 30 percent increase in operating profit on strong mobile phone sales; the world’s second-largest phonemaker sold 70 million handsets during the first quarter.

The TV and appliances division recorded an operating profit of 100 billion won, but experts pointed out that it just barely missed a deficit and was able to swing back after two consecutive quarters in the red.

The mixed bag of results led Samsung Electronics to issue less-than-positive forecasts about the upcoming quarter.

“We believe the business environment will continue to be challenging due to the uncertainties in the global economy we expect to encounter in the second quarter while competition is expected to get fiercer as we roll out new products,” Samsung said.

In March, Choi Jee-sung, Vice Chairman and CEO of Samsung Electronics, had said he hopes to set new profit records this year.

Last year, the company had a record-breaking year with 154.63 trillion won of sales and operating profit of 17.3 trillion won, with net profit of 16.15 trillion won.

Samsung released its second smartphone, the Galaxy S 2 amid speculation about when its biggest “smart” rival Apple will be launching its iPhone 5.

By Kim Ji-hyun (jemmie@heraldcorp.com)