Admin l Thursday, April 27, 2017
KOREA – Samsung Electronics today announced financial results for the first quarter ended March 31, 2017.
Samsung’s revenue for the quarter was KRW 50.55 trillion, about US$44 billion, an increase of KRW 0.77 trillion YoY, while operating profit for the quarter was KRW 9.90 trillion, an increase of KRW 3.22 trillion YoY.
In the first quarter, sales for the memory and display businesses increased, owing to high ASPs and strong sales of premium products. However, revenue from the mobile business decreased due to a decline in flagship product sales.
Profits were driven by the components businesses, namely the semiconductor division and the display panel segment.
The memory business posted significant earnings growth, both YoY and QoQ, led by favorable supply-demand conditions and sales growth of premium high-density enterprise SSDs. The System LSI business improved its earnings on the back of increased sales of application processors for flagship smartphones and greater demand for image sensors and display driver IC (DDI).
For the display panel business, LCD maintained solid earnings QoQ due to robust sales of large high-resolution panels under favorable ASP conditions. Overall OLED performance improved YoY, due to strong demand, and slightly improved QoQ as a result of increased sales of new flexible products.
For the IT & Mobile Communications (IM) Division, earnings declined QoQ due to price adjustment of the Galaxy S7. As for the Consumer Electronics (CE) Division, earnings for the TV business declined YoY due to higher panel prices.
Regarding the recently acquired Harman, its earnings were consolidated into Samsung’s first quarter results beginning March 11. As a result, its impact on the first quarter financials was minimal.
Looking ahead to the second quarter, the company expects to achieve growth on the back of continued robust memory performance together with improved earnings from the mobile business following the global rollout of the Galaxy S8 and S8+.
For the components businesses, semiconductor earnings growth is expected to continue. This will be driven by solid demand for high-density DRAM and SSDs in the server market, increased shipments of 10nm AP, and sustained strong demand for image sensors and DDI.
As for the display business, the company will focus on fulfilling strong demand for flexible OLED panels, and look to maintain profitability in LCD through enhanced cost reduction.
For the set businesses, operating profit is expected to improve in the mobile business following the global expansion of the Galaxy S8 and S8+. In the CE Division, earnings will likely improve with the launch of QLED TV and strong seasonal demand for air conditioners.
Moving on to the outlook for the full year ahead, the company expects overall earnings to grow YoY. This will be led mainly by the components businesses based on favorable supply-demand conditions for memory and greater shipments of OLED panels. The set businesses, meanwhile, will focus on maintaining profitability through expanded sales of flagship products.
For the memory business, amid strong demand for servers and mobile devices, the company will look to maintain profitability by enhancing cost competitiveness through sales of 1xnm DRAM and 64-layer V- NAND. Meanwhile, the possibility of an increase in the industry’s supply of 3D NAND in the second half of 2017 exists.
For OLED, revenue is expected to grow YoY due to an increase in the supply of flexible panels in the second half. However, in the mid- to low-end segment, the company anticipates possible competition from LTPS LCDs.
For the mobile business, market competition is expected to intensify in the second half. Against this backdrop, the company will strive to maintain profitability through robust sales of the Galaxy S8 and S8+ and the launch of a new flagship smartphone in the second half. Moreover, Samsung will also look to sustain profitability in the mid- to low-end segment by launching new products and streamlining the lineup.
For the TV business, Samsung will focus on increasing profitability by expanding its high-end lineup, including ultra-large size and UHD TVs. Additionally the home appliance business will continue to secure new sources of revenue by increasing investments in the B2B segment.
Looking at the mid- to long-term, the growth of IoT, AI and automotive businesses in the IT industry is expected to drive demand for components, particularly high-performance energy-efficient memory products, SoCs and sensors, as well as flexible OLED panels for new form factors.
Meanwhile new business opportunities are expected in the set business with developments in cloud, AI and connectivity solutions for smartphones and smart home products.
In response to these paradigm shifts, the company is aware of the need to strengthen its capabilities via strategic investments and M&As. However, uncertainties in the business environment may pose challenges.
Total capital expenditure (CAPEX) executed in the first quarter was KRW 9.8 trillion, including KRW 5.0 trillion for the semiconductor business and KRW 4.2 trillion for the display segment. Although the capex plan for 2017 has not been finalized, the overall annual capex is expected to increase significantly particularly for investments in V-NAND, System LSI and OLED.
