Samsung issued the warning for the financial report in Q1, and advised investors that the earnings in Q1 will fall behind the market expectations; it was mainly caused by the weak sales of Samsung's memory and OLED panel business. Earlier this month, Samsung reported that Q1 revenue is about 52 trillion won and the operating profit is 6.2 trillion won, it has been dropping 60% comparing to the same period of last year. Now Samsung has confirmed that it blamed the collapse on falling profits for memory chips.
According to the zdnet report, the operating profit of Samsung was 6.2 trillion won in the first quarter of 2019, it was the lowest rate since the Galaxy Note 7 recall case in 2016. Samsung said the falling demand for its memory chips and OLED was the main reason for the sharp drop in profits, while its mobile business may have profit growth due to the solid sales of the Galaxy S10.
The chip business of Samsung still remains the biggest contributor to its operating profit, which increases by 4.12 trillion won, while the mobile business of Samsung gets 2.27 trillion won.
At the same time, its screen business reaches an operating loss of 560 billion won, but its consumer electronics sales can make up the loss with an operating profit of 540 billion won. The company's consumer electronics business owes its operating profit to strong sales of its QLED televisions.
The QLED TV business of Samsung shows an increase in profitability due to the falling cost of LCD panel and the increasing demand for TV in 65-inch or above.
Demand for OLED panels in its screen business was lower than expectation; it is because of the weak sales for iPhone (Apple is one of their main customer), and Samsung said the demand for its OLED panels would recover, as its downstream suppliers will launch flagship phones soon.
The memory chip business of Samsung had led the company to make record of profits over the past two years. However, memory products are essentially the commodities that traditionally follow the uplink and downlink cycles, are now going through a downlink cycle. The company said it expected the demand for memory chips will be increased in the second half of the year, but there was still uncertainty.
The processor business of Samsung has an increase in sales profits; it may be due to the strong demand for the S10. Earlier this month, Samsung announced that it would invest $120 billion in its processor business over the next 10 years to balance its long-term profit flow, and further mentioned they are successful of developing EUV 5nm processes for their customers.
Samsung said that although the Galaxy S10 has a good performance in mobile industry, the fierce competition for mid-end and low-end phones could affect their profits. Samsung, the world's largest smartphone maker, has focused more on midrange phones in recent years, such as the A80 series, it is going to compete with Huawei and Xiaomi, particularly in Southeast Asia and India.
Along with the commercial launch of 5G networks in South Korea, the profit of its network business has also increased, as Samsung is one of the largest suppliers.