Samsung predicts gradual rebound in microchip business

SEOUL, AJU - Samsung Electronics posted a 30.7 percent on-year drop in net earnings in the fourth quarter of 2018, ending its record-setting performance driven by a wave of robust growth in the microchip business. This year’s business prospects are not so bright, but the company predicts a gradual pickup in microchip sales.

Due to weak demand for memory chips and smartphones, Samsung’s net profit in the October-December period fell to 8.46 trillion won ($7.92 billion) from 12.2 trillion won a year earlier. Operating profit was down 28.7 percent on-year to 10.8 trillion won, and sales fell 10.2 percent to 59.27 trillion won.

In the semiconductor division, Samsung’s fourth-quarter operating profit dropped 28.7 percent on-year to 7.77 trillion won, as demand for memory chips declined sharply due to inventory adjustments by major customers in the data center and smartphone segments.

Demand is likely to remain weak in the first quarter of this year due to continued seasonal inventory adjustment, but Samsung predicts the semiconductor sector is expected to rebound gradually throughout 2019 on the back of growing demand for high-performing chips.

For decades, the semiconductor industry has been highly cyclical. Demand was mainly driven by the personal computer market throughout the 1980s and 1990s and smartphones later on. Experts predict a different cycle, citing the broadened usage of highly efficient chips to meet the needs of a new industry.