Samsung first quarter results and future plans

On 29th April, Samsung Electronics announced the financial results for the first quarter of 2020, a January-March period. According to the figures, overall sales increased 5.6% year-on-year and decreased 7.6% quarter-on-quarter to 55,330 billion won, and operating income increased 3.43% year-on-year to 6,450 billion won. While net income fell 3.2% to 4,880 billion won.

A demand for semiconductors for servers and mobile devices increased, while demand in the display business and consumer electronics business, was affected by seasonal trends further negatively compounded by coronavirus.

Total capital investment amounted to 7.3 trillion won in the quarter, of which 6 trillion won was invested in semiconductors and 800 billion won in displays.

Looking at the results of the semiconductor business alone, sales increased by 22% year-on-year, and 5% to 17,640 billion won, and operating income decreased by 3% Year-over-year and increased by 16% Quarter- on-Quarter.

In the memory business, demand increased mainly in servers and PCs, and continued investment in 5G infrastructure experienced a seasonal downturn.

Especially for DRAM, demand from data centers continued to be strong due to increased use of streaming services and online shopping. On the other hand, with regard to NAND, the demand from major customers who have adopted high-density storage exceeding 128 GB, especially server SSDs for data centers, continued to grow as network utilization increased.

Profits in the foundry business declined due to a decrease in demand for high-performance computing (HPC) from China.

Regarding semiconductor market trends in the second quarter of 2020, the company forecasts that demand from DRAM applications will remain strong.

This is mainly due to an increase in server capacity demand as a consequence of a rapid increase in remote working, online education, streaming services, and et cetera. Demand for mobile devices is uncertain, and the company will focus on responding to server demand.

For NAND, on the other hand, the market growth rate is expected to level off, as the impact of lower smartphone demand offsets stronger SSD demand from data centers. Therefore, the company announced it will focus on expanding demand for high-density server SSDs exceeding 2 TB while continuing to move to the 5th generation V-NAND.

Regarding the memory market condition from the third quarter of 2020, Samsung sees coronavirus as one of the major uncertainties in the demand for mobile devices. On the other hand, the company sees demand from servers and PCs segment as strong and rather certain. However, if the spread of coronavirus would continue for long, it may lead to a decrease in overall demand.

Nevertheless, we expect that the rise of cloud-based services will accelerate in the medium to long term. As a result, demand for high-end, high-performance memory is expected to continue to rise.

Samsung has also decided to faster implement 1Z-nm DRAM and 6th-generation V-NAND in response to market changes.

Samsung’s System LSI Business offers a full range of portfolio for mobile industry including mobile processor, image sensor, Bio-processor, security and display solutions. In the System LSI business in the first quarter of 2020, demand was strong due to increased demand for 5G processors and high-resolution image sensors, but in the second quarter, consumer sentiment declined due to the spread of coronavirus. As a result, the company predicts that demand for System LSI segment will remain sluggish, and the company will minimize these negative impacts by giving top priority to the supply of high-resolution image sensors and increasing its presence in the 5G SoC (System on Chip) market.

Additionally, from the third quarter of 2020 onwards, with the release of 5G smartphones from multiple companies, the demand for 5G SoC is expected to increase, together with the demand for high-performance image sensors.

Q1 2020 foundry business performance declined due to lower demand for HPC chips from Chinese customers. In the second quarter, subject to market conditions, the company is planning to start mass production of 5nm chips using EUV and aims to become a leader in EUV process utilization.  Samsung faces strong competition from TSMC, though, the world’s largest foundry which is ahead in mass production using EUV. Further into the future, Samsung also plans to focus on developing 3 nm processes using GAA.