Samsung Electronics Co Ltd has reported a 15% fall in profit as a result in part of a steep fall in the price of NAND chips.
For the first quarter ended March 31, the Suwon, South Korea-based company reported net income of KRW 1.59 trillion ($1.72bn), down from KRW 1.8 trillion ($2.03bn) in the year-ago quarter. This is the second straight quarterly fall in profits at the Korean giant. However, revenue rose 3% to KRW 14.39 trillion ($15.48bn) from KRW 13.96 trillion ($15.01bn) a year earlier.
There were many difficulties in the first quarter due to a sluggish demand for key products and a decline in their prices due to an oversupply in a seasonally weak period of the IT Industry, said the company.
Samsung Electronics is made up five operational divisions: Semiconductor, LCD, Telecommunication, Digital Media, and Digital Appliances.
Semiconductor is the core division, and the company is the world’s largest memory chipmaker. Sales here rose 3% to KRW 4.48 trillion ($4.82bn), but on a sequential basis they fell 17% from KRW 5.42 trillion ($5.77bn) in the fourth quarter.
Samsung makes DRAM chips used in personal computers, as well as NAND chips, commonly found in MP3 players and digital cameras. Samsung said it experienced sluggish demand for both DRAM and NAND flash memory chips due to seasonality. It also said it was hurt by the 50% decline in the price of NAND flash memory chips in the industry.
Over the years Samsung has invested heavily in flat panels, and is now one of the world’s biggest makers of flat-screen televisions. It is also the largest supplier of liquid crystal displays used in other manufacturers’ TV sets, as well as in laptops and mobile phones. During the first quarter, sales at this division rose 6% to KRW 2.84 trillion ($3.06bn) but fell 11% sequentially from KRW 3.18 trillion ($3.38bn) in the fourth quarter.
Samsung is the world’s third largest mobile phone manufacturer, and sales at its telecommunications unit rose a modest 0.2% to KRW 4.60 trillion ($4.94bn), despite it shipping a record 34.8 million handsets during the quarter.
Sales at the Digital Media division, which includes printers, computers, and monitors, fell 0.2% to KRW 1.55 trillion ($1.67bn), but sales at the Digital Appliances division (kitchen white goods) rose 13% to KRW 0.77 trillion ($829m) thanks to strong sales of air conditioners.
Looking forward, the company retained its positive outlook for the year, but there is little doubt it will remain under intense pressure in the next quarter, again due to pricing and oversupply issues in its core chip market.