First-quarter revenue recorded 50.55 trillion won and operating profit 9.90 trillion won.
Possibility of increased 3D NAND supply in the second half, intensifying smartphone competition expected

Samsung Electronics announced first-quarter 2017 results with consolidated revenue of 50.55 trillion won and operating profit of 9.90 trillion won.

First-quarter performance was driven by strong performance in the components business, resulting from robust memory and display prices and expanded sales of premium products. In particular, operating profit increased by 3.2 trillion won compared to the same period last year, and the operating profit margin rose from 13.4% to 19.6%.

The components business saw a significant increase in performance driven by strong memory prices, expanded sales of premium products such as high-capacity enterprise SSDs, increased sales of APs for flagship smartphones and diversification of applications, strong LCD panel prices and expanded sales of high-value-added products, and increased sales of flexible OLEDs.

In the case of the set business, operating profit decreased year-on-year due to a decline in flagship smartphone sales and strong TV panel prices.

Meanwhile, Harman's performance was also reflected in these results. The scale is not large as it reflects only performance results from March 11, when the acquisition process was completed. Starting from the second quarter, the plan is to provide Harman's revenue and operating profit separately.

In the second quarter, the company's overall performance is expected to grow as semiconductor performance continues to improve and wireless business performance improves, such as through expanded sales of the Galaxy S8.

In the components sector, strong demand for high-capacity and high-value-added memory is expected to continue, and in the System LSI sector, performance is anticipated to improve due to increased supply of 10nm APs and DDIs. For OLED, the company plans to maintain increased sales and solid profits by actively responding to demand for flexible products from major clients and external clients.

The set business is expected to see improved performance driven by the global expansion of Galaxy S8 sales, increased sales of new products such as QLED TVs, and the peak season effect for air conditioners.

Set business focuses on maintaining profitability by strengthening product leadership

This year, Samsung Electronics expects year-over-year earnings growth driven by its components business, fueled by the continued robust memory market and increased OLED supply; meanwhile, the company plans to focus on maintaining profitability in its set business by strengthening product leadership, such as by expanding sales of flagship products.

However, in the second half of the year, there is a possibility of increased 3D NAND supply in the memory business, and in the OLED business, there is also a persistent risk of intensified competition with LTPS (low-temperature polysilicon) LCDs for mid-to-low-end OLEDs. Competition in the wireless business is also expected to intensify in the second half of the year due to the launch of new products in the industry.

In the mid-to-long term, amidst rapid changes in the IT industry such as the rise of IoT, AI, and automotive electronics, demand for high-performance and low-power chipsets like memory, SoC, and sensors within the components business is expected to surge, along with the expansion of demand for flexible OLEDs.

The set business is also expected to see the expansion of new business opportunities as the market shifts toward software and connectivity, such as cloud, AI, and smart homes.

Execution of 9.8 trillion won in facility investment, 5.0 trillion won in semiconductors and 4.2 trillion won in displays

To respond to these changes, it is essential to strengthen competitiveness through strategic investments and M&A aimed at securing advanced technologies and discovering new growth engines. However, difficulties are also anticipated in mid-to-long-term business strategies due to uncertainties in the domestic and international business environment.

9.8 trillion won in capital investment was executed in the first quarter, of which 5.0 trillion won was invested in semiconductors and 4.2 trillion won in displays.

Although this year's facility investment plan has not yet been finalized, investment is expected to increase significantly compared to last year, centered on V-NAND, System LSI, and OLED.