Gloomy Outlook
Samsung Electronics’ profitability is expected to deteriorate in the second quarter of this year, unlike the previous prediction.
Securities firms’ quarterly operating profit estimates have been adjusted downward, with the most optimistic estimate being 9 trillion won (US$8.8 billion) and the least 7.9 trillion won (US$7.7 billion). The wide gap implies the difficulty in prediction. What is noteworthy though is that the most pessimistic estimate dropped toward the end of June. Last month, Korea Investment & Securities adjusted its estimate from 9.3 trillion won to 8.3 trillion, won and Samsung Securities cut its forecast from 9.4 trillion won to 8.5 trillion won.
Such negative forecasts can be attributed to the IT & Mobile Division, which accounted for over 60 percent of the electronics giant’s sales and business profits last year. The division’s smartphone and tablet PC shipments are estimated to have declined significantly in the current quarter. “According to our forecast, smartphone and tablet PC shipments have fallen at least 10 percent and approximately 20 percent from the preceding quarter, respectively,” said research analyst Song Myung-sup at HI Investment & Securities.
In the meantime, the Consumer Electronics and Device Solution Divisions are expected to have achieved a slight growth from the previous quarter. Both the DRAM and NAND flash shipments by the semiconductor business unit are forecast to have increased as well to the point of offsetting the risk of dropping prices.
Until recently, market experts said that the new flagship smartphone Galaxy S5 would improve Samsung Electronics’ quarterly performance. However, business conditions are not favorable for the company as of now. Chinese manufacturers such as Huawei, Lenovo, and ZTE are increasing their presence in their home turf, which is the largest in the world, with mass-market phones. ZTE is recruiting experts for overseas market penetration, too.
Under the circumstances, concerns are rising over a possible negative impact on the quarterly business results of the other subsidiaries of Samsung, such as Samsung SDI and Samsung Electro-Mechanics.