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Samsung Electronics announces first quarter profit decline

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Seoul (AFP)

Samsung Electronics, the world's largest maker of chips and smartphones, said on Tuesday its first-quarter net profit slid as demand fell for its main products in a context of increased competition.

Between January and March, the Korean giant's net profit was 5.040 billion won, its worst result since the third quarter of 2016, a fall of 56.9 percent from the previous year. .

Operating profit also plunged 60.2%, while sales fell 13.5% to 52.4 trillion won (40.4 billion euros).

Samsung Electronics is the flagship of the Samsung Group, by far the largest of South Korea's largest family conglomerates, whose health is vital to the 11th largest economy in the world.

The group has been able to withstand the contrary winds in recent years but has just suffered another major setback after the humiliating postponement of the launch of an iconic smartphone and the incarceration of its de facto leader.

Samsung had to postpone the end of April the release of its foldable Galaxy Fold smartphone, an ultra-sophisticated device that it spent almost eight years to develop, due to problems of screen fragility.

At the same time, the group's profitability is under strong pressure due to the increase in the global supply of electronic components such as demand contracts.

– Withdrawal of action –

Samsung Electronics also faces increasing competition in the smartphone market from its Chinese rivals offering lower-priced equivalent products such as Huawei, which surpassed Apple in the US in 2017 and is now rising to second place in the world.

"Mobile devices suffered from weak demand and increased competition," said Samsung Electronics, which issued an early warning to its investors in early April. "Large screens have also suffered the effects of a drop in LCD panel prices in a context of bad seasonal results," he said in a statement.

Shares were down 0.87% on the morning trading session on the Seoul Stock Exchange.

In early April, Samsung launched the world's first 5G smartphone, with South Korea becoming the first country to offer the fifth generation of mobile standards across the country.

But he had to postpone the launch of his Galaxy Fold for $ 2,000 when the first testers found the break of his foldable screen after a few days of use.

This device was not the first foldable phone, but it must have boosted demand and rekindled an innovation market.

"Growth in competing markets for TVs and smartphones is expected to be a challenge in the second half of the year," the group continues.

– Explosive batteries –

South Korea's SK Hynix, the world's second-largest memory chip maker, also saw operating profit fall in the first quarter.

Greg Roh, an analyst at HMC Securities & Investment, predicted that the bearish trend would continue in the second quarter. "Things may change in the third quarter due to the growing demand for memory chips," he told AFP.

In the context of lowering the margins in the handset division, Samsung Electronics had already taken part in the game thanks to booming sales of its memory chips, which power its own phones, but also those of its competitors, including rival Apple.

South Korea also held 20% of the Chinese smartphone market, the world's largest market for smartphones, but its sales plummeted to less than 1%.

The group's reputation was seriously contaminated in 2016 by the Galaxy Note 7 Explosive Battery, whose recall cost billions of euros.

In addition, the heir of the Samsung Group Lee Jae-yong was stuck in the great corruption scandal that cost former South Korean President Park Geun-hye his job. He spent almost a year behind bars before regaining his freedom in February 2018.

According to the rating agency Fitch, Samsung's operations are expected to start normalizing by the end of the year with the recovery of the semiconductor segment.

The impact of Samsung's slowdown (on the chip market) is expected to be lower than for peers as a result of investment in DRAM production, which gives the company cost advantages to maintain profitability in periods of weakening " , she says as well.

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