Below Expectations
Samsung Electronics announced its earnings for the fourth quarter of last year on Jan. 8. The figure was below expectations, although the operating profit of the company had continued to rise for four quarters in a row from 4.06 trillion won (US$3.36 billion) recorded in the third quarter of 2014. It seems to be difficult for the company to improve the figure for the time being with its efforts for cost reductions in the wake of the failure of the Galaxy S5 considered to be reaching the limit.
The performance of the semiconductor division of Samsung Electronics was affected by lower chip prices attributable to a decrease in the demand for PCs and mobile devices. In the fourth quarter of 2015, the average DRAM price fell approximately 15 percent from a quarter ago and the system LSI shipments fell short of expectations as well. Under the circumstances, the operating profit of the division is estimated to have decreased from 3.66 trillion won to three trillion won or so.
The display division took a significant hit from the oversupply of LCD panels and the like by Chinese suppliers. The price of LCD panels is on a rapid decline these days, by a monthly average of 6 percent since October last year to be specific. The profit of the division is estimated to have more than halved from 930 billion won to 400 billion won.
The IT & mobile division’s profit is expected to have decreased from 2.4 trillion won to about two trillion won between the third and last quarters of 2015. Although Samsung Electronics is still on top in the world in smartphone sales volume, most of its best sellers have moderate prices and relatively lower profit margins.
The consumer electronics division was the only arm that showed at least some improvement. A decline in the price of LCD panels and the Black Friday event in the United States allowed the division’s quarterly profit to almost double to approximately 700 billion won.
In the first quarter of this year, Samsung Electronics is expected to show little improvement in terms of profits due to inventory gluts and lower prices associated with the semiconductor and display segments in particular. Meanwhile, the IT & mobile division’s profit is unlikely to fall, with the Galaxy S7 scheduled to be released before the end of March.