Samsung Elec flags mobile weakness after record Q1 profit

The logo of Samsung Electronics is seen at its office building in Seoul, South Korea.(Reuters pic)samsun

SEOUL: Samsung Electronics Co Ltd said weakness in the global smartphone market would slow earnings growth, as it reported record quarterly profit on Thursday thanks to strong demand for semiconductors used in servers.

The world’s biggest maker of memory chips, smartphones and television sets also flagged softer demand for smartphone OLED panels as a challenge for the second quarter.

“Generating overall earnings growth across the company will be a challenge due to weakness in the display panel segment and a decline in profitability in the mobile business amid rising competition in the high-end segment,” Samsung said in a statement.

Samsung shares are down about 12 percent from last November’s all-time high and have gained just 1.1 percent so far this year, due to concerns about the mobile market and flow-on weakness in its components businesses.

Operating profit was 15.6 trillion won ($14.4 billion) in the first quarter, up 58 percent from a year ago and in line with the 15.6 trillion won the company had estimated.

Revenue jumped 19.8 percent to 60.6 trillion won, also in line with its earlier estimate.

The South Korean rival and supplier to Apple Inc has shipped about 10 million units of its flagship Galaxy S9 smartphone since sales began in mid-March, in what analysts said was a solid showing.

It helped Samsung’s mobile business book 3.8 trillion in quarterly profits, up 82 percent from a year ago, analysts added.

The chip business was Samsung’s top earner again as it booked a record 11.6 trillion won operating profit in January-March, from 10.9 trillion won in the previous quarter, despite signs the recent boom in memory chips was tapering off.

A sharper-than-expected drop in NAND flash chip prices, used in permanent data storage, was offset in the quarter by strong sales of server DRAM chips driven by tech firms’ investments in data centres. This raised the average price of DRAM chips, used for temporary data storage, analysts said.

Samsung Electronics shares were up 1.1 percent soon after the earnings release, while the KOSPI benchmark share price index was 0.6 percent higher.