Tech firms’ earnings to rebound this year

The 2019 fourth quarter earnings by South Korea’s electronics firms will be disappointing but the figures would start to rebound in the first quarter this year, industry watchers said Sunday.

Korean electronics firms will begin posting their final quarterly performance results from 2019 with Samsung and LG Electronics spearheading the announcements.

The release of the quarterly reports around Wednesday is to coincide with their participation in the world’s biggest consumer electronics show in Las Vegas.

Detailed reports according to business divisions will be released in end-January after the Lunar New Year holidays.

With general projections favorable toward semiconductors in 2020, industry experts predict that if Samsung Electronics’ operation performance touched rock-bottom in the 2019’s fourth quarter, the semiconductor business is bound to rebound.

Common industry knowledge predicts semiconductors to operate in a surge cycle every three years.

Financial data provider Yonhap Infomax projected Samsung Electronics’ average anticipated revenue for the fourth quarter of 2019 to be 60.5 trillion won ($51.8 billion), with 6.5 trillion won in operating profit. The revenue would be a 2.1 percent on-year increase, but the operating profit would be a 39.6 percent on-year fall.

Compared to the quarter immediately before it, the revenue would be a 2.4 percent reduction and the operating profit more than 17 percent.

According to Yonhap Infomax’s projection, Samsung Electronics’ yearly operation for 2019 will notch revenue of 231.1 trillion won and operating profit of 27.1 trillion won, a 5.2 percent and 53.9 percent fall, respectively.

Triggering these falls is the drastic fall in the price of semiconductors.

Mirae Asset Daewoo predicted that the operating profit of semiconductor industry to fall from 2018’s 44.5 trillion won to 13.7 trillion won in 2019.

The tumble caused by the lackluster performance of dynamic random access memory is marginally offset in the fourth quarter by the NAND flash memory.

Experts predicted DRAM to fall 8 percent in the fourth quarter, and NAND to rise 4 percent.

Hyundai Motor Securities predicted a fall in operating profit for Samsung Electronics citing the withdrawal of the company’s last mobile phone factory in Huizhou, China.

The costs incurred from the factory closure and the development and marketing costs for Samsung’s foldable device Galaxy Fold will result in an operating loss of 12.7 percent on-year, said Hyundai Motor Securities. Consequently, it predicted a 2.1 trillion-won operating profit for Samsung’s IT & Mobile division.

Hana Financial Investment offered 2.3 trillion-won operating profit for the IT & Mobile division, citing the hiked average sales price of smartphone prices due to the Galaxy Fold.

The clouds looming over Samsung Electronics’ 2019 performance will clear in 2020, the security firms said.

Mirae Asset Daewoo predicts Samsung’s 2020 revenue to rake in 245.5 trillion won and operating profit to hit 38.9 trillion won, marking growth of 7.1 percent and 41 percent, respectively.

DRAM prices will rapidly rise, and semiconductor operating profits alone will notch 22.1 trillion won, while the foldable phones will contribute to Samsung’s IT & Mobile division to the tune of 11.2 trillion won in operating profit, Mirae Asset Daweoo said.

Shinhan Investment Corp. also foresaw a DRAM price rise helping Samsung to rebound starting from the second quarter of 2020, after the initial negative effects of decreased organic light-emitting diode use dissipates after the first quarter. Samsung uses OLED for its mobile devices.

LG Electronics, despite the favorable performance in household electronics, is expected to post a considerably reduced operating profit on-quarter in the fourth quarter of 2019 due to sluggish smartphone sales.

Its predicted revenue is 16.4 trillion won, with operating profit of 290 billion won for the fourth quarter of 2019.

This would be an on-year increase of 4.4 percent in revenue and 284.2 percent in operating profit, compared to the fourth quarter of 2018, which had been a notably unfortunate year for LG Electronics’ smartphone business.

On-quarter, revenue would mark a 4.9 percent increase, but operating profit would plummet 62.7 percent.

Daishin Securities assessed this as a relatively satisfactory result, given weak smartphone sales and dampened household electronics demand during the winter months, as well as exacerbating competition in the TV industry.

The fourth-quarter operating loss for LG’s smartphones will be 256 billion won, an additional blow of some 100 billion won compared to the third quarter’s 161 billion-won operating loss, Daishin Securities said.

However, with the beginning of the busy quarter and the expansion of premium electronics, and the added lineup of OLED TVs, Daishin Securities anticipated LG’s operating profits to increase 221 percent on-quarter.

Hana Financial Securities also foresaw LG’s revenue and operating profit in the first quarter of 2020 to jump 6 percent and 13 percent, respectively.

NAND flash memory is anticipated to turn profitable from the third quarter of 2020, as will DRAM, industry sources said.

By Lim Jeong-yeo (kaylalim@heraldcorp.com)