Samsung Electronics has announced consolidated revenues of KRW39.44 trillion (US$37.45 billion) for the second quarter of 2011, up 4% on year. Operating profits for the quarter, however, declined 25% from a year earlier to KRW3.75 trillion as a result of lower profits generated from the company's chip business and continued losses reported by its display panel unit.
Nonetheless, the sales and operating profit results came within the company's guidance range disclosed in early July.
Samsung reported KRW3.51 trillion in net profits for the second quarter, representing an 18% drop compared to the same period of 2010.
Samsung attributed the on-year decrease in second-quarter operating profits to the poor performance of its semiconductor and display panel operations. "The bottom line was supported by an operating profit of KRW1.67 trillion from the telecommunications businesses," Samsung said in a statement.
Samsung's telecom division, including mobile communications and telecommunication systems, posted operating profits of KRW1.67 trillion on revenues of KRW12.18 trillion in the second quarter. The mobile communications unit saw revenues rise 45% on year to KRW11.69 trillion in the second quarter buoyed by higher shipments.
Samsung revealed that total shipments of its mobile handsets increased in the high-single-digit range sequentially in the second quarter, driven by brisk sales of smartphones.
For the telecommunication systems unit, second-quarter revenues and operating profits improved on year supported by increased investment from mobile carriers in LTE network infrastructure, Samsung said.
In contrast, growth in Samsung's component operations remained constrained.
Samsung's semiconductor division generated operating profits of KRW1.79 trillion in the second quarter of 2011, improving from the KRW1.64 trillion registered in the first quarter but declining from KRW2.94 trillion a year ago. Revenues came to KRW9.16 trillion in the second quarter, down 4% on year.
Sales of Samsung's memory-IC unit went down 12% from a year earlier to KRW5.89 trillion in the second quarter. "Demand for commodity DRAM remained weak as global PC shipments saw low-single digit growth," the company indicated. "In response to continued oversupply in the market, Samsung strengthened its cost competitiveness through further migration to 30nm-class DRAM production and reinforced its focus on high-value added products," it continued. For NAND, demand in the second quarter was also driven by orders for mobile device applications while spot prices decreased on weak seasonality, Samsung added.
Samsung's display panel operation swung to operating losses of KRW0.21 trillion in the second quarter of 2011 from profits of KRW0.88 trillion a year ago. Revenues slid 9% on year to KRW7.09 trillion in the quarter. While the ASP for LED panels for notebooks and monitors climbed moderately in the second quarter, prices dropped for TV panels over 40-inches in diameter, the company noted.
Forecast for 3Q11
"Despite the challenging business environment and global economic uncertainties, we achieved continued on-year revenue growth in the second quarter driven by mobile device sales, particularly the success of our smartphones," Robert Yi, head of Samsung's investor relations team, said in a statement. "Heading into the third quarter, which typically sees increased consumer demand for electronics, we expect competition to remain tight, and will continue to enhance our cost competitiveness and technology leadership in the components businesses."
In the third quarter, increased seasonal PC shipments are expected bolster demand in the key DRAM segment, although concerns remain over high inventory levels among PC manufacturers, Samsung said. NAND supply is forecast to be tight due to strong seasonal demand driven by smartphone and tablet sales.
As for panels, Samsung expect total industry shipments for the third quarter to rise 6% sequentially to 184 million units although global economic uncertainties may continue to weigh on consumer demand.
Samsung believes that market demand for mobile handsets will increase by more than 15% in the second half of 2011 buoyed by consumers upgrading to smartphones. In the third quarter, Samsung will continue to drive sales of the Galaxy SII and strengthen its product lineup with new mobiles featuring LTE technology, and expand its Galaxy Tab portfolio in various sizes.
2011 capex target
Capital expenditure for the second quarter was KRW5.6 trillion bringing the total investment for the first six months of 2011 to KRW11.2 trillion, according to Samsung. The company said its planned capex budget for the year of KRW23 trillion remains unchanged, however, a shift in allocation to increase semiconductor and reduce LCD investment was possible.