Samsung Electronics Unable to Withstand 'Memory Cold Wave,' Q1 Operating Profit Falls Below 1 Trillion Won for the First Time in 14 Years (Update)

Q1 Earnings Announcement... Semiconductor 4.5 Trillion KRW Loss
First Below 1 Trillion KRW Since Q4 2009

Samsung Electronics recorded an operating profit of 640.2 billion KRW in the first quarter, unable to withstand the memory downturn. This is the first time in 14 years since the first quarter of 2009 during the global financial crisis that Samsung Electronics' quarterly operating profit has fallen below 1 trillion KRW. The semiconductor (DS) division posted a loss of 4.58 trillion KRW, which impacted the overall performance.

Samsung Electronics announced on the 27th that its consolidated operating profit for the first quarter was preliminarily estimated at 640.2 billion KRW, a 95.47% decrease compared to the same period last year. This marks the first time in 14 years since the first quarter of 2009 during the global financial crisis that Samsung Electronics' quarterly operating profit has dropped below 1 trillion KRW. It also fell short of securities firms' estimates. The securities firms' operating profit estimate posted on the financial information provider FnGuide was 697.4 billion KRW.

Sales amounted to 63.7454 trillion KRW, down 18.05% from the same period last year. Net profit was 1.5746 trillion KRW, a decrease of 86.1% over the same period.

Samsung Electronics DS Division Hwaseong Campus view. [Photo by Samsung Electronics]

By business division, the DS division recorded an operating loss of 4.58 trillion KRW, a decrease of 13.03 trillion KRW compared to the same period last year. Compared to the previous quarter, it decreased by 4.85 trillion KRW.

Regarding the first-quarter performance of the memory semiconductor business unit, Samsung Electronics stated, "The memory business saw a significant decline in performance compared to the previous quarter due to weakened customer purchasing sentiment amid external uncertainties, continued inventory adjustments by customers, falling prices, and increased inventory asset valuation losses including DRAM."

Regarding the System LSI (high-density integrated circuit) business unit's performance, it said, "Due to the off-season, demand from major applications decreased sharply, leading to a significant drop in demand for System on Chip (SoC), sensors, and Display Driver ICs (DDI), resulting in a substantial decline in performance."

For the Foundry (semiconductor contract manufacturing) business unit, it stated, "Performance declined due to demand contraction and order reductions caused by increased customer inventory."

In the second quarter, all three divisions?memory, System LSI, and foundry?are expected to see slight improvements in performance.

Samsung Electronics said, "Investment is being conservatively executed mainly in memory data centers, and customer inventory adjustments continue, so demand recovery will be limited."

It added, "System LSI is expected to see a slight improvement in performance compared to the first quarter as the effect of customer inventory reduction appears," and "Foundry is expected to see a slight improvement in performance as demand recovers due to customer inventory normalization."

View of Samsung Electronics Seocho Building in Seocho-gu, Seoul. [Image source=Yonhap News]

Samsung Electronics did not provide specific comments on the background, scale, or timing of production cuts in the first quarter. Whether this will be addressed during the first-quarter earnings conference call held that morning is a matter of keen interest.

Previously, Samsung Electronics maintained a stance of "no artificial production cuts," but on the 7th, it officially acknowledged production cuts for the first time, stating, "We are adjusting memory production downward to a meaningful level."

The industry expects that with Samsung Electronics joining SK Hynix and US-based Micron in production cuts, the decline in memory prices will ease as early as the second quarter or at the latest from the second half of the year.

SK Hynix said in its conference call the day before, "Now all suppliers have started production cuts, and the effects are expected to be fully realized from the second quarter, so inventory normalization is expected within this year."

Meanwhile, Samsung Electronics' DX (IT & Mobile Communications and Consumer Electronics) division recorded an operating profit of 4.21 trillion KRW in the first quarter, down 350 billion KRW compared to the same period last year.

Samsung Display's operating profit decreased by 320 billion KRW to 780 billion KRW, while Harman recorded an increase of 30 billion KRW to 130 billion KRW.

This content was produced with the assistance of AI translation services.