Samsung Reports First Quarterly Loss as Global Demand Evaporates

Strategic Insights -

Samsung Electronics, the world's biggest manufacturer of memory chips and liquid crystal displays, has reported its first quarterly loss ever, echoing the pain felt by technology rivals worldwide. The South Korean giant's operating loss of 937 billion won (approximately $682 million) for the October-December quarter is a reversal from the 1.78 trillion won profit it generated during the same period a year earlier. Sales at Samsung's chips division plummeted 18 percent from the June-September quarter, and LCD sales fell 12 percent, highlighting the rapid impact of the financial crisis and credit squeeze.

Key Takeaways:

  • Samsung reported an operating loss of 937 billion won (approximately $682 million) for the October-December quarter, marking its first quarterly loss ever.
  • Sales at Samsung's chips division plummeted 18 percent from the June-September quarter, and LCD sales fell 12 percent.
  • Global demand for technology products has evaporated, and price pressures are intensifying, prompting companies to rein in spending.
  • The chip sector is suffering particularly badly, with price pressures leading to a 42 percent decline in the cost of computer memory chips in the final three months of 2009.
  • Companies such as Apple, which has a significant stake in the global chip market, may be vulnerable to the decline in chip prices.
  • Microsoft has announced significant layoffs, affecting 5 percent of its workforce, and Intel has announced 5,000 to 6,000 job cuts and plant closures.
  • Advanced Micro Devices (AMD) has posted a $1.42 billion loss and is laying off close to 9 percent of its workforce.
  • LG Electronics has swung to its first net loss in seven quarters and expects sales and profitability to decline further this year.
  • Sony has warned that it expects a substantial loss for the year ending in March and has been put under review by Moody's for possible downgrade.

Statistics:

  • Samsung's chips division sales plummeted 18 percent from the June-September quarter.
  • LCD sales fell 12 percent.
  • The cost of computer memory chips declined 42 percent in the final three months of 2009, according to DRAMexchange Technology (Bloomberg News).
  • Microsoft has laid off 5 percent of its workforce.
  • Intel is laying off 5,000 to 6,000 workers and shutting production at some plants.
  • AMD has posted a $1.42 billion loss.
  • LG Electronics expects sales and profitability to decline further this year.

Sources:

  • Bloomberg News
  • DRAMexchange Technology
  • Moody's
  • Reuters