Samsung Electronics: Near Term Consumer Demand Recovery Expectation Premature

Robert Yi, Vice President of Samsung Electronics, cautioned:

It is still premature to expect the global economy as well as the consumer demand recovery in the near term.

Earnings Down Yi cited rising factory utilization rates by memory and LCD manufacturers and increasing prices as risk factors for Samsung in 2009. Samsung announced first-quarter earnings on April 24. Net income fell from KRW2.19 trillion to KRW619.2 billion due to losses from semiconductors and LCDs.

LCD Turn Red Samsung’s LCD division experienced a loss of about KRW310 billion, a complete reversal from a year ago when the division posted a profit of KRW1 trillion. LG Display, the second largest LCD manufacturer behind Samsung, announced last week that demand is stronger than expected and prices are starting to increase. LGD expects losses to stop before the end of the second quarter.

Bottom Line Although demand is clearly starting to pick up compared to earlier this year, overall demand for LCD goods will require more time to rebound to levels seen a year ago. With demand for LCD goods improving there is the risk of LCD manufacturers becoming over-excited and building an over-supply situation in the second half of 2009. If that happens inventory will climb, prices will collapse and profits will decline. Of course, end-user consumers will be happy to see even lower-priced LCD TVs, monitors and notebooks.

Source: Bloomberg

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