Samsung reports solid memory demand, drastic smartphone decline

Samsung Galaxy Z Flip smartphone
Samsung reported its Galaxy Z Flip sales were solid in the first quarter, despite a drastic drop in overall smartphone demand. Memory chip demand was also solid, with investments in 5G infrastructure and DRAM for cloud. (Samsung)

Samsung Electronics announced first quarter revenues for semiconductors of $14.5 billion with a 22% operating profit margin on solid demand for memory chips.

Samsung said Wednesday that it was helped by continued investments in 5G infrastructure and increased demand for DRAM products from cloud applications related to remote work and online education with COVID-19 quarantines.

NAND demand was also relatively solid, the company said, due to purchases by major customers who adopted high-density storage.

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Semiconductors make up roughly one-third of the revenues for all of Samsung’s business segments with the highest profit margins. 

Across all its business units, Samsung reported $45.6 billion in revenues in the first quarter with just $5.3 billion in operating profits, or an 11% profit margin. That represented a 5.6% revenue increase from the first quarter of 2019, but a 7.6% decline from the previous quarter.  The company reports earnings in semiconductors, displays, mobile (including smartphones), and appliances in its consumer electronics division,

Last year, Samsung was second in semiconductor revenues globally to Intel, and had $52.5 billion in revenues.

The second quarter outlook for DRAM remains firm, but demand for mobile devices remains “highly uncertain,” said Han JimMan of Samsung’s memory marketing team, according to a transcript of the Wednesday earnings call by Seeking Alpha.  For NAND, there will be impacts from a decrease in smartphone demand, but a growing demand for SSD, he added.

Samsung also said mobile demand will decline sharply in most regions due to COVID-19. For the first quarter, revenues in mobile were $21.4 billion, but with a 10% operating profit margin and $2.1 billion in operating profit.  Overall demand fell “drastically” in the first quarter and shipments declined as well, according to JongMin Lee of the mobile communications business. However, Galaxy S20 Ultra sales were greater than expected, with solid sales of the Galaxy Z Flip, the company said in a statement.

With COVID-19 people do not have much outdoor activity so mobile handset demand is impacted, Han JimMan added. 

Shares of Samsung traded down slightly on Wednesday at $41.25.

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