Seoul, Jan 31 (GCBusiness) Samsung Electronics, South Korea’s tech behemoth, posted record earnings last year mainly due to outperformance in its chip-making business, a regulatory filing showed Thursday.
Revenue rose 1.8 percent over the year to reach a new record high of 243.77 trillion won (219.34 billion US dollars) in 2018.
Operating profit gained 9.8 percent to hit a fresh high of 58.89 trillion won (53 billion US dollars), and net income grew 5.1 percent to 44.34 trillion won (39.9 billion US dollars), the biggest ever recorded by the company.
The record earnings were attributed to the outperformance in Samsung’s semiconductor business, which recorded an operating profit of 44.57 trillion won (40.1 billion US dollars) last year.
The chip-making unit’s profit accounted for three quarters of Samsung’s total operating profit in 2018.
Samsung’s mobile phone division recorded 10.17 trillion won (9.15 billion US dollars) in operating profit last year, while the display panel and the consumer electronics units logged operating profit of 2.62 trillion won (2.36 billion US dollars) and 2.02 trillion won (1.82 billion US dollars), respectively.
However, Samsung’s fourth-quarter earnings logged a double-digit reduction as profit from its chip-making business almost halved on a drop in demand for memory chips used in data centers and smartphone, the company said in a statement.
During the October-December quarter, Samsung’s revenue declined 10.2 percent to 59.27 trillion won (53.33 billion US dollars) compared with a year earlier.
Operating profit sank 28.7 percent to 10.8 trillion won (9.72 billion US dollars) in the fourth quarter, and net income plunged 31 percent to 8.46 trillion won (7.61 billion US dollars).
The ratio of operating profit to revenue was 18.2 percent in the December quarter, down from the previous quarter’s 26.8 percent that was the highest ever recorded in Samsung’s history.
The chip-making unit posted an operating profit of 7.77 trillion won (6.99 billion US dollars) in the fourth quarter, nearly half of the previous quarter’s 13.65 trillion won (12.28 billion US dollars).
Samsung said overall market demand for memory chips dropped in the final quarter of last year on macroeconomic uncertainties and adjustments in inventory levels by customers including datacenter firms and smartphone makers.
Slow demand for chips was forecast to continue in the first quarter of this year on weak seasonality and customers staying the course with inventory adjustments. The demand was expected to recover from the second quarter.
Operating profit for the display panel business fell to 970 billion won (873 million US dollars) in the fourth quarter from 1.1 trillion won (990 million US dollars) in the previous quarter.
The fall was attributed to rising competition in the LCD panel market despite solid demand for flexible OLED panel.
During the January-March quarter, the mobile display sale was likely to be affected by unfavorable market conditions such as intensifying competition and sluggish smartphone demand.
The smartphone-making unit’s operating profit declined to 1.51 trillion won (1.36 billion US dollars) in the fourth quarter from 2.22 trillion won (2 billion US dollars) in the prior quarter.
Samsung said the overall smartphone market was sluggish in the fourth quarter despite a strong seasonal demand, forecasting that weak demand for smartphone would continue in the first quarter on a seasonal slowdown.
Operating profit for the consumer electronics division grew to 680 billion won (612 million US dollars) in the fourth quarter from 560 billion won (503.9 million US dollars) in the previous quarter.
It came as the global TV market expanded by a double-digit in the fourth quarter despite slow demand in emerging economies. In the first quarter, TV demand was forecast to weaken further due to a seasonal factor.