Semiconductors laugh, smartphones cry

Samsung Electronics recorded consolidated sales of 58.48 trillion won and an operating profit of 14.87 trillion won in the second quarter of 2018.


Q2 Composite

In the second quarter, although memory continued to perform well, sales of smartphones and displays declined, resulting in a 4% decrease in revenue and an increase of 0.8 trillion won in operating profit compared to the same period last year. Compared to the previous quarter, revenue decreased by 3% and operating profit decreased by 0.8 trillion won.

Looking at the breakdown by segment, the semiconductor division recorded sales of 21.99 trillion won and an operating profit of 11.61 trillion won. Achieving solid performance driven by increased demand for products for data centers and high-capacity storage, the company solidified its product competitiveness by focusing on the sales of high-capacity, high-value products, such as 1X nanometer-based server DRAM of 64GB or more.

The display division recorded sales of 5.67 trillion won and an operating profit of 0.14 trillion won. Performance declined due to slowing demand for flexible OLED panels and decreased sales of LCD TV panels.

The IM division recorded sales of 24 trillion won and an operating profit of 2.67 trillion won. Although performance declined due to decreased sales of the Galaxy S9 amid stagnant demand in the high-end smartphone market, results in the network sector improved thanks to increased LTE expansion investments by major overseas clients.

The CE division recorded sales of 10.4 trillion won and an operating profit of 0.51 trillion won. While TV profits improved due to strong sales of high-value products such as QLED TVs amidst a boom in global sports events, performance in home appliances declined due to a slowdown in demand for air conditioners.

Meanwhile, in the second quarter, the won weakened against the dollar but showed partial strength against other currencies such as the euro and real, resulting in a negative exchange rate impact of approximately 400 billion won compared to the previous quarter, centered on the set business.

Capital investment in the second quarter amounted to 8.0 trillion won, with 6.1 trillion won in semiconductors and 1.1 trillion won in displays by business sector. Cumulatively for the first half of the year, a total of 16.6 trillion won was executed, including 13.3 trillion won in semiconductors and 1.9 trillion won in displays.


Second Half Forecast and Plan

In the second half of the year, performance is expected to improve compared to the first half, driven primarily by the components business, as robust memory market conditions persist and the supply of flexible OLED panels expands.

In the semiconductor sector, memory is expected to continue delivering solid performance due to sustained robust demand from servers and PCs, as well as strong demand driven by the launch of new mobile products. In particular, we plan to focus on strengthening our technological leadership by actively responding to increasing customer demand for differentiated products, such as high-capacity memory for servers, expanding the proportion of 10nm-class products, and launching full-scale mass production of 5th generation V-NAND.

Solid performance is expected in System LSI and Foundry due to strong demand for APs and image sensors driven by the entry into the peak smartphone season.

In the case of displays, performance is expected to improve due to the expansion of flexible OLED panel supply; however, despite growing demand, LCD performance is projected to remain weak due to increased supply in the industry.

The IM division anticipates that a challenging market environment will persist due to the launch of new models and intensifying price competition within the industry; therefore, it plans to drive sales expansion by launching the new Galaxy Note early while simultaneously strengthening the competitiveness of its mid-range and budget models.

The CE division is expected to see improved performance compared to the first half of the year, driven by TVs, in anticipation of the year-end peak season. For TVs, earnings growth is projected to continue due to increased sales of products such as QLED and 8K TVs, while the home appliance division plans to focus on securing profitability by expanding its premium product lineup.

In the mid-to-long term, new demand is expected to be generated in the components business due to changes in the IT industry such as IoT, AI, and 5G, and opportunities in the set business are also projected to expand through inter-device connectivity.

Samsung Electronics plans to continue its growth by actively responding to new demand for automotive and AI based on its advanced semiconductor and display technologies, and by securing a lead in 5G technology through form factor innovations such as foldable smartphones.