Samsung Electronics Co, the world’s biggest smartphone and memorychip maker, yesterday reported a slump in first-quarter net profits in the face of a weakening chip market and rising competition.
The result is the latest bad news for the tech titan, which last week was forced to delay the release of its much-hyped US$2,000 foldable smartphone owing to problems with the screen.
Net profits in the January-to-March period were 5.04 trillion won (US$4.3 billion) — the lowest since the third quarter of 2016 and down 56.9 percent year-on-year.
Operating profit also plunged 60.2 percent to 6.2 trillion won, while sales fell 13.5 percent to 52.4 trillion won.
The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of South Korea’s family-controlled conglomerates that dominate business in the world’s 11th-largest economy, and it is crucial to the country’s economic health.
Samsung had warned investors of a 60 percent-plus fall in first-quarter operating profits, citing weak display and chip sales.
“Mobile displays suffered slower demand and intensifying competition with LTPS LCDs,” the company said. “Large displays also took a hit from a continued decline in LCD panel prices amid weak seasonality.”
“Growing competition in the mature TV and smartphone markets is expected to pose a challenge in the second half” of this year, Samsung said in a statement.
Samsung launched its top-end S10 5G smartphone earlier this month, after South Korea won the global race to commercially launch the world’s first nationwide 5G network.
The quarterly figures came after South Korea’s SK Hynix Inc, the world’s second-largest memorychip maker, said that operating profits plunged more than two-thirds in the first quarter.
Greg Roh of HMC Securities & Investment projected Samsung’s operating profits to continue falling in the second quarter of this year.
“Things might change in the third quarter, when memorychip demand increases,” he told reporters.
Samsung supplies screens and memory chips for its own smartphones and Apple Inc, and server chips for cloud companies such as Amazon.com Inc.
It once had a 20 percent share of China’s smartphone market, but has seen that tumble to less than 1 percent owing to a rise in competition from local firms in that country.
Samsung’s reputation took another hit after the bribery conviction of Jay Y. Lee — the son and heir of the group’s ailing chairman Lee Kun-hee. He was released in February last year after several of his convictions were quashed on appeal.
Fitch Ratings said it expects Samsung’s operating performance to start normalizing by the end of this year, with the recovery of its semiconductor business — the firm’s main profit driver.
“The impact on Samsung from the [chip] downturn is also likely to be smaller than for peers because of its investments in advanced DRAM production capacity, which gives the company cost advantages that allow it to sustain profitability during periods of weak margins,” it said.
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to