Samsung
Electronics Co., Ltd. today announced financial results for the second quarter
ended June 30, 2015. Samsung’s revenue for the quarter was KRW 48.54 trillion, a
three percent increase quarter-on-quarter (QOQ), while the operating profit for
the quarter was KRW 6.9
trillion, an increase of KRW 900 billion QOQ. In the company’s earnings
guidance disclosed on July 7, 2015, Samsung estimated second quarter
consolidated revenues would reach approximately KRW 48 trillion with consolidated operating
profit of approximately KRW 6.9 trillion.
The overall
QOQ improvement in earnings was largely due to strong sales in the Semiconductor
Business, led by memory products and mobile application processors, as well as
the Consumer Electronics (CE) Division which benefited from the launch of new
TV models. Despite the launch of Galaxy S6, improvement to earnings was quite marginal
due to low smartphone shipments and an increase in marketing expenses for new
product launches.
While
2H 2015 is expected to present mounting challenges, the company will try to
improve earnings, as strong seasonality should drive growth in TV sales, while
the 14-nanometer foundry business should also see sales growth. Meanwhile,
despite risks posed by potential supply increase of LCD panels and premium DRAM
products, the Memory Business and the Display Panel segment are expected to
register solid earnings. While the IT & Mobile Communications (IM) Division
is expected to face a difficult business environment, the sales momentum for
high-end products will be maintained by adjusting the price of the Galaxy S6
and S6 edge and introducing new premium smartphone models. New middle- and
low-end models will also be introduced, and the IM Division will continue to
work on improving efficiency of expenditures.
Capital
expenditure (CAPEX) for 2Q 2015 totaled KRW 5.9 trillion, including KRW 3.2
trillion for the Semiconductor Business and KRW 1.1 trillion for the Display
Panel segment. Total CAPEX for 1H 2015 was KRW 13.2 trillion, which is approximately
a 30 percent year-on-year (YOY) increase. A further increase in CAPEX for 2H
2015 remains under review, and CAPEX will be focused on securing platforms for
future growth, such as V-NAND technology, and improving the manufacturing
efficiency of display panels.
Semiconductor Sees Solid Growth
The Device
Solutions (DS) Division posted KRW 17.87 trillion in consolidated revenue and KRW 3.87 trillion in
operating profit for the quarter.
Despite
low seasonality for the Memory Business, earnings remained steady due to an
increase in high value-added products for mobile devices and servers, as well
as an increase in the average density. Meanwhile, S.LSI revenue increased QOQ,
due to increased sales of smartphone components driven by 14-nanometer mobile
AP and steady demand for high-end LSI products, such as high-pixel CMOS Image
Sensors and DDI for flexible display.
In 2H
2015, overall demand in the memory market is expected to be driven by broader SSD
adoption for servers and PCs, as well as the launch of new smartphone models
with higher memory density for enhanced specifications. The company will
continue to secure profitability by accelerating 20-nanometer DRAM migration,
expanding V-NAND supply and continuing 10-nanometer class NAND migration.
Meanwhile, the System LSI Business’ revenue is expected to improve compared with
1H 2015, driven by an increase in 14-nanometer foundry revenue, the launch of
new CMOS sensors and further entry into the Chinese mobile market. The System
LSI Business will look to diversify its customer base and products to solidify
its foundation for future growth.
Innovation to Drive Future Growth of Display Panel Segment
The
Display Panel segment posted KRW 6.62 trillion in consolidated revenue and KRW 540 billion in
operating profit for the quarter.
Although
profitability of LCD panels improved due to increased sales of premium TV
panels, such as those for UHD TVs, overall earnings for OLED panels decreased QOQ
due to weak seasonality and increased expenditures from ramping up its new
flexible display product line.
In 2H
2015, LCD market growth for UHD TV panels is expected to continue; however,
risk factors exist including overall over-supply and decrease in demand from TV
set makers. The company will look to achieve stable growth in OLED panels by
reinforcing product line-ups for the middle- to low-end market, expanding customer
base and addressing the demand for new high-end mobile devices. In particular,
the Display Panel segment will reinforce the company’s leadership in the
flexible display market. In the future, the company will develop new products,
such as transparent and mirror displays, to secure new mid- to long-term growth
engines. Despite downside risk in LCD panels during the third quarter, the
Display Panel segment will strive to maintain profitability levels at par with
the previous quarter by improving OLED panel sales.
New Mobile Devices to Improve Revenue
The IM
Division posted KRW 26.06
trillion in consolidated revenue and KRW 2.76 trillion in operating profit for the
quarter.
Overall
revenue improved slightly QOQ for the Mobile Business, due to increased shipments
of the Galaxy S6 and Galaxy S6 edge, despite a drop in overall smartphone shipments
caused by declining shipments of older middle- to low-end models. Although revenue
increased, profits increased marginally QOQ, due to supply difficulties from
higher than expected market demand for the Galaxy S6 edge, as well as increased
marketing expenditures that typically accompany flagship product launches.
Meanwhile,
second quarter tablet shipments slightly decreased due to extended off-season
in the market. The tablet market in 2H 2015 is expected to report negative
growth YOY; however, the Mobile Business intends to actively respond to market
demands with the Galaxy Tab A series and a new product scheduled for later this
year.
In 2H
2015, the smartphone market is expected to grow YOY; however, the growth rate
is expected to slow down. The Mobile Business plans to firmly maintain its sale
of premium smartphones by flexibly adjusting the price of the Galaxy S6 and S6
edge, and launching a new model with a larger screen. Supply issues concerning
the Galaxy S6 edge have been addressed. Moreover, the IM Division plans to
enhance efficiency across the board, including product line-ups, marketing and
R&D.
Premium Products Add to CE Division’s Growth
The CE
Division, encompassing the Visual Display (VD), Digital Appliances (DA),
Printing Solutions and Health and Medical Equipment (HME) Businesses, posted
KRW 11.20 trillion
in consolidated revenue and KRW 210 billion in operating profit for the quarter.
Despite
a stagnant TV market, the VD Business saw improved performance QOQ due to the
release of new models, such as the SUHD TV, as well as an expansion of premium
products. Meanwhile, the DA Business saw improved performance compared to the
previous quarter, thanks to sales of premium and innovative products, such as
the Chef Collection refrigerators and Active Wash washing machines.
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