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As the poor performances of the electronic component affiliates continue, their high dependence on Samsung Electronics becomes once again a hot issue.
As the poor performances of the electronic component affiliates continue, their high dependence on Samsung Electronics becomes once again a hot issue.

 

The rosy prospects of Samsung Electronics, the “eldest” of Samsung Group, continue, while the clouds cast over Samsung IT component affiliates are not cleared even in the second quarter.

As the release of the second quarter earnings results is nearing, analysts say the operating profit of Samsung Electronics would reach 8 trillion one. In particular, the Information Technology & Mobile Communication (IM) division focusing on the Galaxy S7 is getting more lucrative, and the semiconductor and Consumer Electronics (CE) division is also anticipated to support the general improvement of the company’s performances.

On the other hand, however, the outlooks of Samsung Electro-Mechanics Co., Ltd., and Samsung SDI Co., Ltd., are dark due to external factors such as the Chinese government regulations and a high level of their dependency on Samsung Electronics. 

The second quarter’s operating profit of Samsung Electro-Mechanics is forecast to decrease more than 70% compared to the same period of last year. According to the estimates from securities firms on June 30, the operating profit of Samsung Electro-mechanics is calculated to be around 22.6 billion won, which is a 76% decrease from a year earlier.

The main reasons for the poor performance of Samsung Electro-mechanics are attributable to the unstable profitability of High Density Interconnection (HDI) business and strong won.

A researcher of Daishin Securities said, “The sales of Galaxy 7 was good, but the lower delivery prices due to its binary supply system gave a negative effect (on the performance of Samsung Electro-mechanics),” adding, “With the stronger won and the one-time cost reflected, a poor performance in the second quarter is expected.” Some industry insiders comment that the company’s excessive focus on smart phone business of Samsung Electro-mechanics caused it to miss the timing to expand its business into new areas such as automobile parts and medical components.

On the other hand, Samsung Display Co., Ltd., is anticipated to turnaround in the second quarter. Due to the Original Light Emitting Diode (OLED) business leading the improvement of the sales performance, the company is likely to be able to achieve an operating profit of 200 billion won in the second quarter. However, the Liquid Crystal Display (LCD) business is expected to see a continuous deficit.

As the poor performances of the electronic component affiliates continue, their high dependence on Samsung Electronics becomes once again a hot issue. Most of the Samsung’s electronic affiliates rely 50 to 60% of its sales on Samsung Electronics. Hence, if Samsung Electronics decide to enter into retrenchment, the affiliates will be hit most hard.

 

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