Samsung Electronics reported a 38% decline in profit due to falling memory chip prices.

The company reported financial results for the fourth quarter ended December 31, 2019 and the fiscal year 2019. Samsung posted KRW 59.88 trillion in consolidated quarterly revenue and KRW 7.16 trillion in quarterly operating profit.

For 2019, Samsung reported KRW 230.40 trillion in revenue and KRW 27.77 trillion in operating profit.

The company said its fourth quarter profit dropped from a year earlier due to the continued fall in memory chip prices and weakness in display panels. Improving demand for memory used in servers and mobile products, as well as solid sales of flagship smartphones, helped ease the decline in overall earnings.

Samsung's Memory Business reported a year-on-year decline in profit as DRAM prices continued its downward trend despite rising shipments. However, earnings increased from the previous quarter, underpinned by increasing demand from data centers and other major applications as well as cost reduction. The company's logic chip business posted a YoY profit growth on demand for high-resolution image sensors and HPC (high performance computing) chips.

Samsung's Display Panel Business suffered weak demand for some premium mobile screens and saw widened losses from the large panel business.

Quarterly earnings improved significantly for Samsung's Mobile Business in annual terms, thanks to solid sales of flagship Galaxy smartphones and lineup changes to improve profitability for mass-market models. Profit fell from the previous quarter, however, due to the fading effect from a new flagship product launch.

Samsung's Consumer Electronics Business also reported a YoY increase in earnings, led by growing sales of premium products including QLED TVs and new appliance offerings.

In the first quarter of 2020, Samsung expects weak sales from seasonality in memory chips, OLED and consumer electronics.

The seasonal effects will likely limit profits in the Memory Business while the outlook is also negative for the Display Panel Business due to slowing demand.

First quarter profit from the Mobile Business is seen steady quarter-on-quarter, as new flagship and foldable models will improve sales but incur additional marketing costs.

Looking ahead to 2020, Samsung expects improvements in overall business performance but also sees continued uncertainties in the global business environment.

Samsung expects memory market conditions to improve gradually thanks to increasing demand from data center companies and 5G smartphone adoption. However, the actual pace of 5G expansion and its effects on DRAM content remain to be seen. The company expects inventory to return to levels seen in previous years within the first half of this year and will focus on transitioning to the next-generation chip production; 1Z-nm DRAM process and 6th-generation V-NAND.

Samsung's System LSI Business will offer differentiated 5G System-on-Chip products and high-resolution sensors.

The company's Foundry Business plans to expand production from the 5nm and 7nm EUV (extreme ultraviolet lithography) processes while working on developing next-generation 3nm GAA (gate-all-around) technology. In 2020, Samsung plans on completing the product design for the 4nm process and a number of 5nm-based product designs in order to diversify its customer base and expand applications using Samsung products.

In Displays, Samsung will prioritize on responding to growing adoption of OLED and folding screens.

The Mobile Business aims to improve profits by expanding sales of premium models, such as the enhanced 5G lineup and new foldable devices. The Network Business will focus on addressing the global 5G market as its Korean business is set to shrink following last year’s nationwide 5G adoption.

In the Consumer Electronics Division, the company will seek to increase sales of QLED 8K TVs and launch new premium appliances such as Bespoke and new lifestyle models.