Samsung reports 60% drop in Q1 profits, declines in phones, chips, displays

Samsung building 800
Despite the staggering losses in its main two businesses, Samsung reported favorable growth in its network business. (Samsung)

Samsung profits dropped 60% year over year during the first quarter of 2019, in line with lower guidance the company offered earlier this year. The company pulled in just 6.2 trillion won ($5.3 billion) in the first quarter of 2019, compared to 15.64 trillion won ($13.4 billion) earned in the first quarter of 2018. Revenue dropped 14% year over year, reaching 52.4 trillion won ($45 billion).

Robert Yi, head of investor relations at Samsung, speaking during the earnings call chalked the losses up to “unfavorable memory market conditions and display business challenging our businesses in 2019." The company expects the decline in memory chips to continue into the second quarter before picking up in the second half of the year.

“For the second half of 2019, the company expects memory chip demand for high-density products to increase, but uncertainties in the external environment will persist,” Samsung said in a statement.

Samsung had warned investors of a disappointing quarter earlier this year, pointing to a slowing demand for its chips and displays and a struggling smartphone business. The company said demand for displays, which Apple uses in its iPhones, has dropped, while its memory chip business has slowed considerably over the last year.

Despite the staggering losses in its main two businesses, Samsung reported favorable growth in its network business, due to “accelerated commercialization of 5G network in Korea,” Yi said. The company also reported demand for high-density memory chips for phones had increased during the quarter, and earnings for its System LSI and Foundry businesses have also improved.

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Samsung's S10 handset sales were solid during the quarter, the company said, but overall it reported a 40% drop in operating profit for its mobile business. Samsung’s display panel business also reported a quarterly loss, due in part to decreased demand for flexible displays.

When asked about its Galaxy Fold, company executives gave a limited answer, and offered no more insight into what had gone wrong with the review phones sent to U.S. media publications beyond what the company had already said.

“We have invested quite a long time and effort in order to develop the Galaxy Fold,” a company representative said, according to a transcript provided by Seeking Alpha. “We believe that it is going to be the product that provides a differentiated premium experience to customers who want to have the latest technology and innovative experiences and that the Galaxy Fold will create a new category in smartphones. And our conviction and commitment behind that has not changed.”

Samsung will release an updated launch schedule in the next few weeks.