by Yoo Seungki
SEOUL, April 30 (Xinhua) -- South Korea's tech giant Samsung Electronics saw its worst profit in two and a half years in the first quarter, expecting negative earnings to continue in the second quarter.
Operating profit more than halved to 6.23 trillion won (5.4 billion U.S. dollars) in the January-March quarter. It was down 60.2 percent from a year earlier, and down 42.3 percent from the previous quarter, Samsung said Tuesday.
It was the lowest in 10 quarters since the third quarter of 2016 when the operating profit was 5.2 trillion won (4.5 billion U.S. dollars).
Revenue declined 13.5 percent over the year to 52.39 trillion won (45.1 billion U.S. dollars) in the first quarter. From three months earlier, it went down 11.6 percent.
The ratio of operating profit to revenue, which gauges profitability, came in at 11.9 percent in the quarter, less than half of 25.8 percent tallied a year earlier. It was also the lowest in two and a half years.
Net income plunged 56.9 percent from a year earlier to 5.04 trillion won (4.3 billion U.S. dollars) in the first quarter. From the previous quarter, it was down 40.4 percent.
The worst earnings in two and a half years stemmed mainly from the downturn in business cycle of the chip industry in addition to lower price of display panels.
Samsung said in a statement that its chip-making business saw a drop in memory chip price as inventory adjustment continued at datacenter companies, despite an increased demand for high-density memory chips for mobile phones, caused by the launch of new flagship smartphones.
The display panel division recorded an operating loss in three years on a reduced demand for flexible displays and an oversupply of large displays, the company noted.
Samsung predicted "limited improvement" in the memory chip market in the second quarter, drawing a dim outlook for earnings in the April-June quarter.
According to a market consensus among local brokerages, Samsung's second-quarter revenue and operating profit were estimated at 53.4 trillion won (45.9 billion U.S. dollars) and 6.5 trillion won (5.6 billion U.S. dollars) each, slightly up from the first quarter.
The downbeat market forecast came amid expectations for the persistent downturn in the memory chip industry, a low possibility for the display panel unit's turn into the black and the still lackluster mobile business.
Some of market watchers expected a fall in the second-quarter earnings of Samsung compared with the first quarter depending on whether the global chip industry's business cycle worsens further.
Samsung forecast that memory chip demand for high-density products would increase from the second half, but it noted that uncertainties in external environment would persist.
Market consensus showed Samsung's third-quarter revenue and operating profit estimated at 57.8 trillion won (49.7 billion U.S. dollars) and 8.5 trillion won (7.3 billion U.S. dollars) respectively.
Samsung has tried to reduce dependence on the volatile memory chips, announcing an investment plan last week to spend 133 trillion won (116 billion U.S. dollars) on non-memory chips by 2030.
The tech giant has sought to expand into healthcare for the past years, but two executives at the biopharmaceutical unit of Samsung Group, South Korea's biggest family-controlled conglomerate, were arrested Monday on suspicion of destroying evidence to cover up an accounting fraud of Samsung BioLogics.
The billions of U.S. dollars of accounting fraud was suspected of supporting Samsung's management control transfer from Samsung Electronics Chairman Lee Kun-hee to his only son and Vice Chairman Lee Jae-yong, who is currently serving a suspended jail sentence for bribery.
The Supreme Court was expected to make a final ruling on the Samsung heir as early as this month. Chairman Lee has been hospitalized since the heart attack in 2014.
During the first quarter, Samsung's semiconductor division logged an operating profit of 4.12 trillion won (3.5 billion U.S. dollars) on revenue of 14.47 trillion won (12.5 billion U.S. dollars).
The division's operating profit was the lowest in two and a half years. The ratio of operating profit to revenue came in at 28.5 percent in the first quarter, down from 55.6 percent a year earlier and 41.4 percent in the prior quarter.
The display panel unit posted an operating loss of 560 billion won (482 million U.S. dollars) in the quarter, marking the first loss in three years since the first quarter of 2016. The unit's revenue stood at 6.12 trillion won (5.3 billion U.S. dollars).
The IT & Mobile (IM) business, which makes smartphones, recorded an operating profit of 2.27 trillion won (2 billion U.S. dollars) on revenue of 27.2 trillion won (23.4 billion U.S. dollars) in the March quarter.
The profit was up 50 percent from the previous quarter, but it was down 40 percent from a year earlier. Samsung's mobile phone sales, including smartphone, declined to 78 million in the first quarter from 86 million a year earlier.
Samsung rolled out the world's first 5G phone in South Korea earlier this month, but some users complained of the slower speed with the 5G networks. Furthermore, the company's first foldable smartphone rollout was delayed on the reported defect of screen.
The consumer electronics division, which produces refrigerators and washing machines, recorded an operating profit of 540 billion won (464 million U.S. dollars) in the first quarter, almost doubling 280 billion won (241 million U.S. dollars) a year earlier.
