Samsung Tops Profit Estimates, Warns of Weaker Phone Demand

Samsung beat analysts’ profit estimates on booming exports of memory chips, but warned of challenges in smartphone demand in the coming months, according to Bloomberg.

Net income rose to 11.6 trillion won ($10.7 billion) in the three months ended March, the company said in a filing , exceeding the 10.9 trillion won average of projections compiled by Bloomberg. Sales climbed 20 percent to 60.6 trillion won.

Although the results demonstrate the chips business is strong, Samsung offered no such reassurance for the smartphone industry, where suppliers have issued gloomy outlooks and seen their shares fall in the past two weeks. The Korean company said its own mobile division will see declining profitability amid weak demand and warned of softer demand for the screens used in Apple Inc.’s flagship iPhone X smartphone.

Samsung’s chips unit posted operating profit of 11.6 trillion won, three times as much as the higher-profile mobile division. Samsung controls about two thirds of the global DRAM market, and contract prices for 32 gigabyte DRAM server modules climbed 5.6 percent in the March quarter from the December period, while prices for 128 gigabit MLC NAND flash memory chips fell 11 percent, according to inSpectrum Tech Inc.

Samsung’s mobile unit, which rolled out its flagship Galaxy S9 smartphone in February, reported operating profit of 3.77 trillion won. But Samsung warned in a statement that its mobile business will see “stagnant sales of flagship models amid weak demand and an increase in marketing expenses“ in the current quarter.

For the display business, Samsung reported profit of 410 billion won, saying that the result was “affected by slow demand for flexible OLED panels,“ which are the screens used inside the iPhone X. Even though it warned of slow OLED demand, Samsung does anticipate a component rebound in the second half, when Apple typically releases new models.