Tuesday, March 31, 2020
Samsung Electronics' Operating Profit in Semiconductor Business Down 21% in Q2
A Record Low in 5 Years
Samsung Electronics' Operating Profit in Semiconductor Business Down 21% in Q2
  • By Kim Eun-jin
  • August 1, 2019, 09:08
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A clean room at Samsung Electronics' semiconductor production facility in Hwaseong, Gyeonggi Province

The operating profit of Samsung Electronics Co. in the semiconductor business stood at 3.40 trillion won (US$2.87 billion) in the second quarter of this year, the lowest in three years after recording 3.37 trillion won in the third quarter of 2016. The company’s operating margin fell to 21.13 percent, the lowest level in five years.

Market experts are saying that the memory market is unlikely to pick up until the end of the year as uncertainties are growing over Japan’s export curbs on semiconductor materials to South Korea amid weak market demand due to the trade dispute between the United States and China.

The South Korean tech giant unveiled its financial results for the second quarter on July 31. It said it posted 56.13 trillion won (US$47.45 billion) in consolidated quarterly sales and 6.60 trillion won (US$5.58 billion) in quarterly operating profit. The sales and operating profit figures decreased 4 percent and 55.6 percent, respectively, from a year ago.

In particular, the company saw its operating profits in the semiconductor and smartphone sectors drop by 70 percent and 42 percent, respectively, dragging down its overall performance. The company’s operating profit rate was 55.1 percent a year earlier and 28.5 percent in the previous quarter. However, some say that the firm put up a relatively good show thanks to its diversified product portfolio. Its operating margin is much higher than SK Hynix’s 9.9 percent. This might be why Samsung Electronics said on July 31 it would not reduce memory production.

The company’s display panel business reported 750 billion won (US$633.98 million) in operating profit for the quarter due to stronger sales of organic light emitting diode (OLED) panels. The mobile and consumer electronics businesses showed a gain of 1.56 trillion won (US$1.32 billion) and 710 billion won (US$600.17 million), respectively. For smartphones, sales of the Galaxy 10 series were lower than expected. For home appliances, it logged a higher figure than the 510 billion won (US$431.11 million) recorded a year earlier, boosted by strong sales of QLED televisions.

It is not easy to predict the second half of the year because of growing uncertainties over the global economy and trade, though demand usually grows during the period on seasonality. Samsung Electronics has delayed the announcement of its shareholder return policy which was scheduled on the same day.

Securities companies estimated the firm’s operating profit in the third quarter at 7.10 trillion won (US$6 billion), slightly higher than this quarter. They said that demand for semiconductors from data centers shows a slow recovery and market conditions in the smartphone sector are gloomy.