Will Samsung see better 2nd quarter?

By Kim Yoo-chul

Samsung Electronics is concerned that the next three months may be a repeat performance of the lackluster first quarter.

``We see the current business challenges will continue in the current quarter because of stiff competition in our key products amid global uncertainty,’’ said Robert Yi, chief of Samsung’s investor relations team, in a conference call to analysts, Friday.

Net profit for Samsung in the first quarter of this year tumbled 30 percent from a year earlier to 2.78 trillion won ($2.59 billion) hit by sluggish demand for LCD panels and TVs.

In a regulatory filing to the Korea Exchange (KRX), Samsung reported a 32 percent decrease in operating profit to 2.95 trillion won, the lowest figure in seven quarters.

Quarterly sales were up just 6.8 percent to 36.98 trillion won year-on-year.

``The results were disappointing but matched its previous earnings guidance,’’ said Kim Do-han, an analyst at Samsung Securities.

Samsung’s display-making division posted an operating loss of 230 billion won during the quarter on the basis of quarterly sales of 6.5 trillion won due to the sluggish LCD-embedded digital demand in China.

The panel-making division recorded its first losses in two years after the first quarter of 2009, Samsung said.

In contrast, Samsung’s semiconductor division posted a profit of 1.64 trillion won, while its telecommunications unit reported 1.43 trillion won in operating profit during the Jan.-Mar period.

Samsung is increasing its memory shipments including value-added mobile application processors (APs) to Apple and overseas partners as the clients need more Samsung chips.

Samsung sold a quarterly record of 70 million smartphones.

Samsung plans to sell 10 million of its upgraded Galaxy S, the Galaxy S II. Its TV division reported 100 billion won profit during the period, a turnaround from an operating loss a quarter earlier.

``More shipments of our value-added chips such as mobile APs helped the semiconductor division’s good performance. Our factory in Austin, Texas, will handle APs to customers,’’ said Samsung in the conference call.

``Basically, we will respond with high-end smartphones. Also, Samsung sees balanced feature and smartphone growth in emerging markets. LCDs will also improve,’’ said Yi.

Actually Samsung and market analysts expect the Korean technology giant to report a better profit in the second quarter as it has begun rolling out more of its value-added products including tablets, smartphones and 3D televisions.

A price rebound of its chips and LCDs is also seen to fuel the momentum, according to Samsung.

``It’s expected that Samsung will report 4 trillion won profit out of the 40 trillion won level in quarterly sales during the second quarter,’’ said Seo Won-seok, an analyst at NH Securities.

Samsung said it spent 5.5 trillion won on facilities during the first quarter, which is 24 percent of this year’s total investment of 23 trillion won.

Electronics companies usually report higher earnings in second and third quarters as the demand for consumer electronics rises amid the back-to-school season in fall.

Set-makers also order more LCDs and chips to parts suppliers ahead of the seasons. Samsung is the world’s top supplier of memory chips and LCDs.

``The key issue is whether Samsung will see a soft-landing of its next-generation products such as 3D TVs and tablets,’’ added Seo.

Samsung will soon release the 10.1 inch Galaxy Tab.

It is involved in a fight with cross-town rival LG for 3D televisions. Samsung still leads the global 3D TV market with its battery-powered 3D glasses.

But the share is falling because LG’s in-house film-type patterned retarder (FPR) 3D technology is cheaper.

``Samsung will strengthen our hardware- and manufacturing-driven initiatives. We think the portion of our 3D TVs will take up 10 percent out of the total TV demand,’’ Yi said.