Samsung warns of profit slide as coronavirus crashes tech-world

Samsung warned profits may slump in the current quarter after the Covid-19 pandemic disrupted demand for its smartphones and gadgets, trimming income gained from surging server-chip orders.

South Korea’s largest company Samsung Electronics Co reported a 4 percent decline in net income to 4.9 trillion won (4 billion US dollars) in the three months ended March. Samsung, which had reported better-than-expected operating profits earlier this month, said the pandemic continued to hammer demand across an array of markets.

The warning from the world’s largest maker of memory chips, smartphones and consumer appliances underscores the uncertainty gripping global industry. As the pandemic spread in the first months of the year, the technology sector took hits from both supply and demand. Samsung joins peers such as Intel Corp in cautioning about the impact of a global economic slowdown.

Samsung “expects the memory business to remain solid, but overall earnings are likely to decline from the previous quarter because Covid-19 will significantly impact demand for several of its core products,” it said in a statement. “In the second half, uncertainties driven by Covid-19 will persist as the duration and impact of the pandemic remain unknown.”

In particular, Samsung said a drop in smartphone earnings is “inevitable” in the second quarter because of store closings and other factors, while profits would also slip in mobile displays. Executives on a post-earnings conference call refrained from offering guidance on the memory market but said the company will continue to invest in semiconductor expansions and research.

The coronavirus pandemic has emerged as one of the largest economic shocks in recent years, disrupting both consumer demand as well as supply chains worldwide. Factories in countries such as China were temporarily shut, crimping orders for Samsung components such as displays.

Meanwhile, retail stores, including those of client Apple Inc, were closed to avoid spreading infections. That’s been offset in part by demand for the memory chips used in datacenters and computers, which allow people to work and study from home. Samsung’s shares stood largely unchanged Wednesday.

(Source: Bloomberg/Yahoo Finance)

/teb