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Samsung’s Q3 net profit plummets on semiconductor market woes

Samsung pledges flexible investment in semiconductors, offering rosier outlook next year

Samsung Electronics on Thursday kept an upbeat outlook on its memory chip business, pledging flexible investments into the sector despite its third-quarter earnings having suffered from semiconductor market woes.

Samsung’s third-quarter earnings released earlier in the day showed that its net profit more than halved due to the lackluster performance of its semiconductors division, despite improved smartphone sales.

In a conference call that immediately followed the earnings release, Jeon Se-won, vice president of Samsung’s memory strategic marketing team, offered a more positive outlook that NAND flash memory chip sales normalized in the third quarter as previously forecast, and that the DRAM inventory will also balance out in the first quarter of 2020. 

“We are still considering the investment (for semiconductor memory) for the next year,” Jeon said. “We will focus on flexible investments according to the market situation.”

NAND flash showed around 10 percent growth in the third quarter. Jeon forecast that semiconductor memory’s yearly growth rate for 2019 will surpass the market outlook.

The South Korean tech giant reported consolidated revenue of 62 trillion won ($53.3 billion) and operating profit of 7.78 trillion won, down 5.28 percent and 55.74 percent on-year, respectively.

As regards revenue by division, the semiconductors sector posted 17.6 trillion won, a 29 percent decline on-year and a 9 percent rise on-quarter. The display panel section logged 9.2 trillion won, up 22 percent on-quarter but an 8 percent fall on-year. Its consumer electronics unit showed 11 trillion won, a 7 percent on-year rise and 1 percent on-quarter decline.

The mobile communications division saw a 17 percent on-year rise and 13 percent on-quarter increase on the back of the sales of new smartphone models -- Galaxy S10, Galaxy Note 10 and Galaxy Fold.

Harman, its US-based subsidiary that produces audio systems for automakers and more, recorded a 19 percent on-year climb and 5 percent on-quarter increase.

“Despite the improvement in sales of smartphones and finished appliances, the memory chip industry continued to struggle, dragging down overall earnings,” Samsung said.

“Still, compared to the second quarter, the cellphone unit and organic light-emitting diode businesses helped shore up earnings.”

The company stressed that its earnings disclosure contains forward-looking statements that may significantly change in the process of accounting review.

The uncertainties that may affect the final outcome include volatility in exchange rates and interest rates, strategic business decisions such as mergers and acquisitions, sale of some units and certain unexpected business developments in its core areas.

For the fourth quarter, Samsung said it will proactively deliver DRAM chips for next-generation smartphones and begin mass production of sixth-generation V-NAND chips. The company is bracing for possible deterioration in the display business due to deepening competition in the midsize panel market and the start of the offseason for larger TV panels.

As for mobiles and consumer electronics, the company said it anticipates a decline in revenue from its new devices, and will seek to expand the overseas sales of 5G devices, while promoting high-end quantum-dot light-emitting diode TVs and the premium lifestyle market centering on 8K TVs.

By Lim Jeong-yeo (