Samsung’s financial report from the first quarter of 2020 – the heavy shadow of COVID-19 on the business of the Korean giant
Meanwhile, the increase in demand for mobile and server parts has caused the income of the Korean company to grow by 5.6 percent compared to the same quarter last year. In addition, the company’s operating profit has also increased by 0.2 trillion won (about $164 million) compared to the first quarter of last year, which Samsung attributes to improving the product portfolio in the mobile business and diversifying OLED smartphone customers.
Samsung in this report With other big technology companies such as SK Hynix and Intel, he predicted that the company’s annual income and profit will decrease due to the instability and uncertainty resulting from the continuation of the Corona virus. From the point of view of company managers, sales and profits from businesses such as smartphones and televisions will decrease significantly; Because COVID-19 has affected the amount of demand and caused the closure of stores and factories all over the world. To face this issue, the Korean company plans to use the flexibility of its global production and supply networks and strengthen its online sales capabilities.
Samsung, unlike usual, has not published the information about the income and operating profit of its businesses in the form of a table, and has contented itself with a detailed reference to the performance of various departments, which we will examine below:
Information technology and mobile communication (IM)
In the first quarter of 2020, the Korean giant managed to achieve a total revenue of 26 trillion won (about 21.5 billion dollars) in the business of information technology and mobile communication, and the operating profit of this sector increased by 17% to 2.65 trillion won (2.65 trillion won). 2.19 billion dollars). The effects of the corona virus have caused the amount of demand in the market to decrease significantly compared to the last quarter, and therefore the supply of the company’s smartphones will also face a drop. However, Samsung has been able to experience decent profitability during this quarter by improving its product portfolio, increasing sales of 5G models and using marketing expenses efficiently. Also, the powerful sale of the foldable phone Galaxy Z Flip in addition to the sales share exceeded expectations Galaxy S20 Ultra Specifically, the average selling price (ASP) of this company’s flagship smartphones has increased compared to last year.
Samsung has predicted that demand in the second quarter will also drop sharply in many regions due to the economic downturn caused by COVID-19. Similarly, the market downturn and store closures are expected to have a direct impact on the decline in product sales and the overall performance of the IM segment. The Korean company has announced that it will focus on improving cost efficiency and strengthening its B2B (abbreviated Business-to-Business) online channels amid market volatility.
From the point of view of Samsung executives, in the second half of this year, despite the possibility of the corona epidemic lasting longer, the effort of manufacturers to compensate for the poor performance in the first half of the year will increase the competition in the market. In this regard, the company will continue to offer distinctive phones in the advanced product segment by launching new models of foldable smartphones as well as the popular Note series. Also, Samsung aims to improve the competitiveness of its products by offering the possibility of using 5G technology in cheaper non-flagship models and improve its operational efficiency in all areas of work, including research and development, production, supply chain and marketing.
Samsung’s network business will also focus on expanding developing technologies and increasing global competition to strengthen the 5G business.
In the first quarter of this year, Samsung’s total revenue in the semiconductor business was 17.64 trillion won, and operating profit was 3.99 trillion won, down 3% compared to the same period last year. While demand in the mobile segment remained flat, revenue from the memory business improved as demand increased, particularly in data center servers and PCs. Also, the profit from the business of logic chips has experienced a good growth following the increase in the supply of parts to the company’s main customers. However, the profits of the foundry business have faced a decline due to the decrease in demand from Chinese customers for HPC chipsets.
In the display panel business, the mobile device display segment saw a decline in revenue, which Samsung attributed to a seasonal decline and lower sales in China following a slowdown caused by the COVID-19 pandemic. This is while the loss of this sector has decreased in the field of large panels.
The data of this report shows that the income of Samsung’s System LSI segment also experienced a decent growth thanks to the increase in demand for 5G mobile chips and high-resolution image sensors for flagship phones. In the second quarter, the company plans to maximize the supply of image sensors with high pixels and chipsets compatible with the fifth generation technology, thus neutralizing the negative effects caused by the corona virus.
Samsung predicts that in the second quarter of this year, the memory business will continue to work strongly, but it is possible that the total revenue of this part will decrease compared to the first quarter. Because the outbreak of COVID-19 has significantly affected the demand for several major products. However, the Korean company plans to control the market changes in the memory business through flexible investments and product portfolio adjustment.
For the parts business, it looks like demand for PCs and servers will remain strong as more people work from home. However, this demand may face a slower trend in the mobile sector. On the other hand, it is expected that the income from the production of OLED screens will be weaker due to the recession prevailing in the smartphone market. Despite this, the company has stated that it is able to meet the demand for new products and expand its presence in new application areas, such as folding displays.
Consumer Electronics (CE)
Department of consumer electronics Samsung It has also faced a decrease in income due to the seasonal recession and the corona virus. According to the report, the profitability of the TV business declined compared to last year, amid pricing pressure from intensifying competition, while the home appliance segment saw a significant improvement, supported by impressive sales of new high-end products.
Taking into account the risks arising from economic instability, Samsung seeks to carefully examine the market situation in the consumer electronics sector and to minimize the negative effects caused by these conditions, by investing Be prepared to face the new situation on effective marketing and advertising tailored to each region.
According to this report, changes due to currency conversion in the quarter ending March 2020 had a small impact on the total operating profit of Samsung Electronics; Because the positive effect caused by the increase in the price of the US dollar and the euro against the Korean won, which was felt mainly in the business of manufacturing parts, has been compensated by the devaluation of the currency in emerging markets. In addition, the company’s capital expenditures in the first quarter of this year totaled 7.3 trillion Korean won, of which 6.0 trillion won was spent on semiconductors and 0.8 trillion won on displays. It is interesting to know that Samsung shares fell by 0.3% after presenting financial results.