SAMSUNG UPBEAT ON BETTER SECOND HALF

But tech giant warns of short-term pain after operating profit slips to 6.2tril won

SOUTH Korea’s Samsung Electronics Co Ltd flagged improved second-half results on expectations of a pick up in memory chip and smartphone sales, after posting its weakest profit in more than two years in the first quarter.

The world’s top maker of semiconductors, however, warned of more short-term pain in the second quarter, with memory chip prices likely to decline further before a rebound in demand as data centres re-stock later in the year.

“For the second half of 2019, the company expects memory chip demand for high-density products to increase, but uncertainties in the external environment will persist,” said the tech giant.

Hit by falls in chip prices and slowing demand for display panels, Samsung posted operating profit of 6.2 trillion won (RM22.34 billion) in the quarter ended March, the smallest since late 2016 but in line with the company’s guidance.

Revenue fell 13.5 per cent to 52.4 trillion won, also in line with

its earlier estimates.

Its core semiconductor business booked a 64 per cent fall in operating profit to 4.1 trillion won, while the display business logged 560 billion won in losses.

But Samsung said its server DRAM chip customers would start rebuilding inventories from the end of the second quarter.

For NAND flash memory chips that suffered big price falls since last year, Samsung said market conditions would stabilise in the second half as high-density chip adoption for mobile devices drives up demand.

An easing in China-United States trade tensions could also unlock demand for consumer electronics and encourage Chinese cloud service providers, which had stockpiled chips in anticipation of a prolonged trade war, to lower inventories to more normal levels, said analysts.

The world’s top smartphone maker said its mobile business posted a 40 per cent drop in operating profit to 2.3 trillion won in the first quarter.

It is hoping to revive flagging growth in its mobile business with its latest handset, featuring a big, bending screen. But in a blow to its renewed focus on innovation, Samsung delayed global sales of the Galaxy Fold phone after reviewers discovered problems with the display.

Samsung forecast weak second-quarter earnings in the display business.

But it said demand for flexible display panels would likely pick up and sales for its smartphones were also expected to rise in the second half, led by new models in all segments including the lowend Galaxy A series.