Samsung-faces-earnings-shock
Samsung office/Courtesy of Samsung Electronics

1Q profit goes down more than 60%

Samsung Electronics, the world’s largest memory chip maker, saw their operating profit more than halve in the first quarter as the prices of its flagship products of semiconductors continue to go down.

The Seoul-based company said on March 5 that its operating profit stood at 6.2 trillion won ($5.47 billion) during the January-March period, down 60.36 percent from a year ago.

The high-tech giant’s sales also went down to 52 trillion won during the first three months of 2019 from more than 60 trillion won in 2018.

The disappointing performances were widely expected because Samsung announced last week that the first-quarter earnings would fail to reach initial projections.

It is very rare for the firm to come up with such an announcement. Hence, many observers expected very weak earnings. But few predicted that profits would go down more than 60 percent.

The market consensus of Samsung’s 1Q operating profit was $7.16 billion, down 48.1 percent year-on-year.

Samsung chalked up record sales and profits last year. But the global semiconductor market has suffered a sharp decline over the past several months to chip away at Samsung’s bottom lines.

It is incredibly rare for Samsung to come up with such an announcement. Hence, many observers expected very weak earnings. But few predicted that profits would go down more than 60 percent.

In particular, the price of memory chips plummeted this year.

Along the same line, Samsung’s cross-city rival SK hynix, the world’s second-largest manufacturer of memory chips, is also likely to watch their operating income cut by half.

To be more precise, Samsung said that its first-quarter profits would be somewhere between 6.1 trillion won and 6.3 trillion won.

Please note that Korean disclosure regulations do not allow earnings estimates to be offered as a range. To comply with such regulations, the above figures represent the median of the estimate ranges,” Samsung said in a statement.

Samsung is Korea’s leading company by any measure. The earnings shock of the firm is feared to further weigh on the country’s moribund economy – some worry that its growth rate would fail to reach 2 percent this year. It expanded 2.7 percent last year.