Recovery unlikely within the year: execs
Samsung Electro-Mechanics’ second quarter operating profit fell far short of the market consensus due to overflowing Multilayer Ceramic Capacitor (MLCC) inventory and less-than-stellar macroeconomic conditions.
On July 24, the Samsung affiliate said its second quarter revenues reached 1.95 trillion won, while operating profit stood at 145.2 billion won. Sales were just shy of the 1.98 market consensus, but the operating profit was nowhere near the 184.8 billion won estimate.
The lackluster performance was mostly triggered by the sluggish demand for IT SET products on account of the ongoing US-China trade row.
“Consumer sentiment is damp, and other unforeseeable factors, such as Washington’s sanctions against Huawei, made it difficult for us to liquidate our MLCC inventory,” said Cho Kook-hwan, a Samsung Electro-Mechanics executive in charge of strategic marketing. “It looks like the market recovery will come later than we expected.”
He expected the inventory to go down in the latter half when more new flagship smartphones are launched and seasonal demand for PCs and TVs rise. “However, it won’t be easy to recover soon due to market uncertainties,” the executive added.
Lee Byung-joon, another company executive, said that while third quarter will continue to be difficult, there are some upsides, such as the seasonal factors, along with US-targeted RFPCB and locally marketed camera modules.
Despite some of the positive factors, however, Lee stressed that this year’s annual revenues won’t show drastic growth due to external macroeconomic conditionss.
As for automobile MLCC, the Samsung unit plans to expand both the lineup and supply capacity. For camera modules, it plans to focus on value-adding features, such as lens and actuators to achieve high-definition and high power optical zoom capacity. Package substrates will be better prepared for the 5G communication era.
Meanwhile, Samsung Electro-Mechanics’ second quarter component sales fell 10% on-year, and 7% on-quarter to 781.6 billion won. Modules saw sales rise 33% on-year, but on-quarter, it fell 15% to 811.2 billion won.
This was due to a mix of factors; the company began to newly supply 5x camera modules for its Chinese clients, and sold more of its high-definition multi cameras, but supplied less for flagship Samsung smartphones and communication modules.
Substrate sales, on the other hand, rose 16% on-year and 5% on-quarter to 346.8 billion won on bigger sales of CPU and mobile AP package substrates.
The Elec is South Korea’s No.1 tech news platform.