Samsung reported first-quarter revenues up 5.6 percent year-on-year to KRW 55.33 trillion, led by demand for its memory products and premium smartphones. The company said demand started to weaken from the end of the quarter due to the spread of the Covid-19 pandemic, and it expects lower second-quarter results as demand for consumer products such as smartphones and TVs slows.
Revenue growth in Q1 was led by the semiconductor division, up 22 percent to KRW 17.64 trillion. Samsung said memory demand was solid for servers and PCs, and the mobile chip business was stable. Operating profit from semiconductors fell slightly year-on-year, to KRW 3.99 trillion from KRW 4.12 trillion, but was up on a sequential basis from KRW 3.45 trillion in Q4.
At the mobile division, revenues were down 4 percent year-on-year but up 4 percent from Q4 to KRW 26.0 trillion. Operating profit increased across both periods to KRW 2.65 trillion, thanks to an improved product mix after the launch of the S20 series and better control of marketing spending, the company said. Samsung said higher-than-expected sales of the S20 Ultra and solid sales of the Z Flip boosted the average selling price, helping offset a sequential decline in shipment numbers.
The consumer electronics business showed the strongest impact from the Covid-19 crisis, with revenues down 20 percent from Q4 and up just 1 percent annually to KRW 10.3 trillion. Operating profit was down across both periods to KRW 0.45 trillion, as profits from the TV business suffered from price pressure and tough competition, Samsung said.
Overall operating profit in the first quarter improved to KRW 6.45 trillion from KRW 6.23 trillion a year ago, while net profit was slightly lower at KRW 4.88 trillion versus KRW 5.04 trillion. Capital expenditure totaled KRW 7.3 trillion, including KRW 6.0 trillion spent on semiconductors and KRW 0.8 trillion on displays.
Significant impact on demand
Looking ahead to the second quarter, the company said it expects the memory business to remain solid, but overall earnings are likely to decline from the previous quarter because Covid-19 "will significantly impact demand for several of its core products". Uncertainty over the impact of the crisis is expected to persist into the second half of the year, Samsung said.
For the component business, memory demand is expected to remain robust for servers and PCs as more people work from home, but it is possible the mobile market may soften. Earnings from OLED screens are likely to be weaker due to a stagnant smartphone market.
Sales and profits of set products business, including smartphones and TVs, are expected to decline significantly as Covid-19 affects demand and leads to store and plant closures globally, Samsung said. To address this, the company will focus more on online sales and attempt to implement a more flexible global production and supply chain. For the mobile business, Samsung plans to strengthen its product line-up with new premium models and more 5G models for the mass market.
