Samsung Electronics' revenue has been weighed down by the weakness in memory chips and displays, although the newly-launched Galaxy S10 smartphone logged solid sales.
The South Korean-based electronics giant today announced its first quarter 2019 results, posting KRW 52.4 trillion ($45.2 billion) in consolidated quarterly revenue and KRW 6.2 trillion ($53 billion) in quarterly operating profit.
Earlier this month, Samsung issued an earnings guidance stating it expected to report first quarter sales of about 52 trillion Korean won ($45.8 billion), 14% lower than last year's first quarter revenue of 60.6 trillion won ($53.3 billion).
Samsung unveiled its flagship Galaxy S10 phones in February and the phones have now gone on sale around the world.
Meanwhile, Samsung officially delayed the launch of its new foldable phone, the Galaxy Fold, after a number of bad reviews showed the new device to be faulty.
In its results, Samsung says the semiconductor business saw a drop in memory chip prices as inventory adjustments continued at data centre companies, while demand for high-density memory for mobile phones increased thanks to new flagship smartphones.
It points out that earnings improved at the system large-scale integration (LSI) and foundry businesses over the sales of smartphone application processors (APs).
The display panel business reported a quarterly loss due to decreased demand for flexible displays and increasing market supplies for large displays.
In the IT and mobile communications (IM) division, Samsung says despite solid sales of the Galaxy S10, profitability in the mobile business declined year-on-year as competition intensified in the low- to mid-range segment.
In addition, it notes that amid softer demand in the overall smartphone market, revamping of the company's mass-market line-up led to a year-on-year decrease in sales volume.
Earnings from the network business increased, buoyed by the launch of 5G telecommunication services in Korea, the electronics company says, adding that sales of premium TVs such as QLED TVs and ultra-large-size models contributed to the year-on-year earnings growth in the consumer electronics division.
Looking ahead to the second quarter, Samsung expects limited improvement in the memory chip market, as demand will likely begin to improve for major applications such as mobile products but price declines will likely continue.
"Demand is seen increasing for APs and CMOS [complementary metal-oxide-semiconductor] image sensors in the system LSI and foundry businesses. For displays, Samsung expects higher demand for rigid panels," the company says.
"The IM division is set to focus on flagship products such as the world's first 5G smartphone and the enhanced mass-market line-up with innovative cameras and display features. The consumer electronics division is likely to report growth in the second quarter on strong seasonal demand for air-conditioners and sales of new premium TVs."
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, it says.
A further recovery is seen for the display business as demand for flexible screens is set to rise on new smartphone launches, says Samsung.
"Growing competition in the mature TV and smartphone markets is expected to pose a challenge in the second half, and Samsung will focus on strengthening its leadership in the premium segment.
"Over the mid- to long-term, the company aims to strengthen competitiveness of key businesses by diversifying applications and delivering innovations in components and new device form factors. Samsung will also continue to expand its capabilities in automotive technology, leveraging HARMAN's solutions, and in artificial intelligence."
In the first quarter, Samsung's capital expenditure totalled KRW 4.5 trillion ($38 billion), including KRW 3.6 trillion ($31 billion) spent on semiconductors and KRW 0.3 trillion on displays.
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