[Asia Economy Reporter Changhwan Lee] Samsung Electronics will announce its preliminary results for the first quarter next week. While the semiconductor business performed well, the mobile phone and display businesses fell short of expectations, leading to an anticipated decrease in operating profit compared to the previous year.
According to industry sources on the 4th, Samsung Electronics is scheduled to announce its preliminary first-quarter results on the 7th. The financial investment sector expects Samsung Electronics to report operating profit around 6 trillion won, slightly below the first-quarter consensus. This represents a decrease of about 3% compared to the previous year.
The decline in operating profit is expected due to poor performance in key business sectors such as smartphones, TVs, and displays amid the spread of the novel coronavirus infection (COVID-19).
Hanwha Investment & Securities released a report yesterday forecasting Samsung Electronics' first-quarter operating profit at approximately 5.8 trillion won, which is expected to be weaker than anticipated. As the impact of COVID-19 intensifies, demand for major sets such as smartphones and TVs has sharply declined, and performance deterioration is deemed inevitable through the second quarter.
By segment, the semiconductor business remains largely unchanged, while the IM (smartphone) division's operating profit has been revised downward. With the rapid spread of COVID-19 since March, smartphone demand has sharply decreased, and Samsung Electronics' smartphone sales are estimated to have been sluggish.
However, the semiconductor segment's performance is expected to remain solid. Due to COVID-19, remote work and video conferencing have increased, leading to expanded server investments and sustained growth in semiconductor demand.
The continued rise in semiconductor prices is also positive. According to market research firm DRAMeXchange, the fixed transaction price of DDR4 8-gigabit (Gb) DRAM products, mainly used in PCs, averaged $2.94 in March, up 2.1% from February.
The fixed price of DDR4 8Gb DRAM, which rebounded to $2.84 in January after 13 months, recorded $2.88 in February and continued its upward trend for three consecutive months through March. The rate of increase expanded from the 1% range in February to the 2% range in March. The rise in DRAM demand is attributed to increased remote and online needs due to virus spread, as well as semiconductor inventory accumulation by server and PC companies. Supply is limited, and with rising demand, product prices have increased.
Daishin Securities expects Samsung Electronics' first-quarter operating profit to be around 6.24 trillion won. While the semiconductor business performed well, the display, smartphone, and home appliance sectors were sluggish due to the impact of COVID-19. In particular, the poor sales of the Galaxy S20, a new smartphone model released in the first quarter, are identified as a major cause of the weak performance. The display business, which is affected by the sluggish smartphone sales, is also analyzed to be underperforming.
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