Mixed Results for Samsung’s First Quarter, Lower Display Panel Revenue

samsung HQSamsung Electronics of South Korea reported revenue of 53.68 trillion Korean won for its first quarter ended March 31, 2014. The firm says its revenue slipped 9 percent quarter-over-consecutive quarter due to “weaker seasonality,” but says its saw gains compared with the same quarter last year.

For the quarter, the company posted consolidated operating profits of 8.49 trillion won, representing a 2-percent increase on-quarter. Consolidated net profit for the quarter increased by 270 billion won to 7.57 trillion won.

In its earnings guidance disclosed on April 8th, Samsung estimated first quarter consolidated revenues would reach approximately 53 trillion won with consolidated operating profit of approximately 8.4 trillion won.

Samsung that although market demand for electronics devices such as smartphones and tablets in the January-March quarter is traditionally slow, profit margins for Samsung’s IT & Mobile Communications (IM) division were driven by strong demand for smartphones.

Despite the overall decline in market demand, the Semiconductor Business continued its solid profitability momentum driven by the expansion of the 20-nanometer-class process migration and a greater appetite for DRAMs used in servers and for graphics solutions.

Samsung expects to see profits rally in the second quarter and beyond, on the back of improved sales of display panels and home appliances. Orders for display panels that are used for premium smartphones and TVs are expected to increase, as new mobile devices are rolled out into the market and as consumers look forward to the upcoming World Cup in Brazil. It also expects the outlook for household appliances will also pick up on seasonal demand for air conditioners, as well as orders for high-end TVs based on the World Cup effect.

To sustain growth throughout this year and in 2015, Samsung says it will strengthen its core business areas with differentiated products through expansion of the next generation V-NAND market by honing in on not only the enterprise business but also on the consumer-focused SSD market. For System LSI, Samsung expects to gain a competitive edge with application processors with 14-nanometer process technology.

Samsung says it will also expand to new product categories such as wearable devices, strengthen its B2B business footprint through Knox and in the education market, and make advancements in its ecosystem for device connectivity.

“While developed markets are expected to lead global economic recovery, macroeconomic uncertainties, such as currency fluctuation in emerging markets due to QE tapering in the US, are expected to continue in 2014,” commented Robert Yi, Senior Vice President and Head of Investor Relations. However, he noted “we expect our overall earnings to improve starting from the second quarter, driven by improvements in the Display Panel segment and the Consumer Electronics division in conjunction with steady growth momentum in mobile and memory businesses.”

Capital expenditure in the first quarter was 5.4 trillion won, which includes 3.3 trillion won for the memory business and 700 billion won for display. As for Samsung’s capex plan for the year, total spending will be similar to levels registered in 2013.

Memory Improves Profitability on Process Migration

Samsung’s Semiconductor businesses – including Memory and System LSI – posted 1.95 trillion won in operating profits for the quarter on 9.39 trillion won in consolidated revenue. The Memory chip business alone recorded the bulk of sales with 6.29 trillion won in revenue, a 3-percent decrease in gains quarter-over-quarter.

In spite of weak seasonality, the memory business addressed strong server and graphics solution demand, and improved profitability by enhancing profitability through expanding 20-nanometer-class DRAM migration. The NAND business maintained profitability by actively responding to market demand in high-density cards and increasing sales in high value-added 3-bit NAND despite a recent ASP decline.

As for System LSI, revenue declined from the previous quarter, as mobile AP demand decreased under weak seasonality, while CIS sales increased led by the launch of ISOCELL, a high mega-pixel product.

For the memory market in the second quarter, Samsung expects server and graphic related DRAM demand to remain strong, while contents per PC and mobile DRAM demand growth to pick up momentum. Samsung says it will continue to enhance profitability by improving cost competitiveness through the expansion of 20-nanometer class process migration and increasing offerings of high value-added differentiated products. For the NAND business, Samsung expects to continue a differentiated strategy based on SSD for data center and PC coupled with increased demand from mid-tier smartphones and increased applications of cost competitive 3-bit NAND products.

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