Demand for Memory Chips Expected to Pick up in 2020
Samsung Electronics' operating profit fell sharply last year due to a drop in semiconductor prices, which resulted from a decrease in demand for memory semiconductors. Demand for memory semiconductors, including DRAMs, is expected to grow this year, driven by the diffusion of 5G services and an increase in demand for cloud computing, but the spread of the Wuhan coronavirus outbreak will be a variable.
Samsung Electronics announced on Jan. 30 that it posted 230.4 trillion won in sales and 27.77 trillion won in operating profit on a consolidated basis in 2019. Compared to the previous year, its sales and operating profit slid by 5.5 percent and 52.8 percent, respectively.
In the fourth quarter of last year, the company recorded 59.8 trillion won in sales and 7.1 trillion won in operating profit. Sales increased slightly due to brisk sales of premium set products, while operating profit shrank by 3.64 trillion won due to a fall in memory semiconductor prices. The company’s system semiconductor division, on the other hand, benefited from increased demand for high-pixel image sensors and high-performance computing (HPC) chips.
The Display Business Division's earnings declined slightly due to weak demand for premium products for small and medium-sized displays compared to the same period of the previous year. Its large display sales also fell due to a price war initiated by Chinese markers of liquid crystal displays (LCDs).
The IM Business Division enjoyed an improvement in sales on the back of a rise in flagship product sales and the reorganization of the Galaxy A-series lineup. It also benefited from U.S. sanctions on Huawei.
The profitability of the CE Business Division rose thanks to the expansion of premium TV products such as QLED and ultra-large TV models, robust sales of new lifestyle home appliances, and the launch of products such as personalized refrigerators and washing machines, in particular, the Bespoke Refrigerator. In the fourth quarter, U.S. dollars, euro and currencies of major emerging markets began to weaken, pushing down operating profit by about 300 billion won from the previous quarter.
Last year, Samsung’s facility investments amounted to 26.9 trillion won – 22.6 trillion won in semiconductors and 2.2 trillion won in displays. Compared to 2018, investment in memory products slid while investment in foundries grew due to facility expansion needed to apply the EUV 7-nm process.
As for displays, investment declined from 2018 after investing in small and medium-sized A4 lines. This year, investment will be subject to changes in demand.