Strong demand for memory and data centres in China seen as a growth sector for Samsung
Samsung reported a fall in profit for the first time in seven quarters as the sale of its mobile devices slowed. Its mobile business booked a 34 percent fall in operating profit to 2.7 trillion won (£1.8 billion) in the second quarter.
The bulk of the company’s operating profit came from the sale of semiconductors and memory chip in Q2, its earnings showed, more than offsetting the mobile decline – as Chinese rivals prove increasingly fierce competition.
Operating profit in the semiconductor division was reported at £10 billion in Q2. The earnings report came 12 weeks after Samsung knocked Intel off the top spot as the world’s largest semiconductor manufacturer.
Robert Yi, Samsung’s head of investor relations, said in a conference call: “Despite a strong performance by our memory business, the total revenue decreased slightly year-over-year, due to a decline in sales of smartphones and display panels.”
Yi said some of the revenue decreases can be attributed to fluctuations in the currency market: “In the second quarter, positives from a weak Korean won against the U.S. dollar were eclipsed by FX of a strong won against the other currencies, such as the euro and Brazilian real, negatively impacting operating profit Q-on-Q”
Sewon Chun Senior VP of Semiconductor Business told investors: “We have grown solid earnings growth by actively responding to Chinese mobile demand for high-density e-storage. As well as concentrating on expansion of 8 and 16 terabyte high density for all flash array. We have stable supply with 64 layer of free NAND at Pyeongtaek campus.”
The company stated that in the memory business they are seeing strong growth as the demand for data centres and dynamic random-access memory (DRAM) is high.
The strong demand for high-capacity storage was aided by a reduction in cost of NAND flash memory.
However, the company’s most visible product; mobile devices, in particular phones, saw its operating profit fall by 34 percent down to £1.8 billion.
This is the company’s biggest mobile sector decline since it released its Galaxy S7 mobile device last year and is blamed on weak sales of the their new S9 mobile device.
Chinese mobile device manufactured by Huawei and One Plus are starting to see growth in western markets, which is affecting Samsung sales in this sector.
Ben Hur Gok VP of Semiconductor Business at Samsung reassured investors that: “Image sensor demand continued to rise, thanks to increasing adoption of dual cameras by Chinese smartphone makers.”
“In the second half of this year, our earnings are likely to return to growth quarter-over-quarter as smartphone makers enter strong seasonality.”
“With respect to the growth will be backed by strong demand for OLED DDIs and high pixel image sensors, the former for use in flagship smartphones and the latter amid increasing adoption of dual camera and triple cameras.”