By Kim Tae-gyu
Staff Reporter
Samsung Electronics, Korea's foremost company by any measure, may fall victim to the global financial crisis as the firm may yield a deficit next year.
Seoul-based Samsung, the world's No. 1 producer of memory chips and flat-panel displays, has never fallen into negative territory since 2000 when it started to compile quarterly data.
``The market consensus is that Samsung's semiconductor unit will lose money during the first quarter of 2009,'' Goodmorning Shinhan Securities analyst Kim Gee-soo said.
``The outfit's flat-panel division would just break even. Hence, if its cash cow cell phone division cannot offset the loss of memory chips, Samsung is expected to run into the red in early 2009,'' he said.
Tong Yang Securities analyst Kim Hyun-joong also raised the possibility of Samsung falling off the cliff.
``When the global system works in an appropriate way, it is simply unimaginable for Samsung to suffer from a deficit because the firm has a nice business portfolio,'' Kim said.
``In an unprecedented situation like today's, however, anything can happen. If the local currency appreciates sharply against the dollar, semiconductors will face jitters worse than expected and Samsung may lose money early next year,'' he said.
Samsung is composed of three main businesses of semiconductors, liquid crystal displays (LCDs) and mobile handsets.
Semiconductors have been the main culprit behind the firm's bottom line's recent thinning. Over the third quarter, the unit barely made a profit of 190 billion won.
The LCD division also saw its profits diminish 57 percent quarter-to-quarter to 450 billion won. Mobile phones achieved a stellar performance with 840 billion won in profits.
Overall, the firm's operating profit dipped to 1.02 trillion won over the July-September period, down 46 percent from the prior quarter. This compares to 2004, when Samsung chalked up 1 trillion won in profit almost every month.
Even Samsung Vice President Chu Woo-sik, who leads the investors' relation team, admitted that time would not be kind to the company.
``The market does not show any sign of recovery, with demand for products decreasing across the world, including in the United States, Europe and China,'' Chu told reporters last month after announcing Samsung's third-quarter results.
``In this climate, oversupply and plunging prices for both LCD and semiconductors would make things more difficult down the road. Accordingly, we plan to slightly slash investments in facilities,'' he said.
Meritz Securities analyst Lee Sun-tae was more optimistic about Samsung's bottom line but he also projects the semiconductor unit is destined for a loss.
``Thus far, only Samsung has managed to make money among global memory chipmakers. It was already an exploit that only Samsung achieved,'' Lee said.
``However, things will be different early next year as prices of memory chips continue to head south ― the market shrank up to 30 percent in October alone. Even Samsung will face setbacks in such a hostile environment,'' he said.