The decreasing price of NAND Flash leads to the profits decline of 60% in Q1 for Samsung

The news about DRAM memory in the previous two years, it has been mostly reported that the price of memory flash has risen again and again. The price of 8GB memory bank was rising to 900 Yuan at that time, which almost broke 1000 Yuan by the end of 2017. However, the memory chip market has shifted from a bull market to a bear market, prices had began to fall since the Q4 of last year, the 8GB memory bank had been falling to 300 Yuan per piece. The price of Memory bank together with the flash memory has been dropping all the time, which has pushed the memory chip industry into a recession cycle; it is resulted in a sharp decline of sales in upstream manufacturers. The finance report released by Micron recently has showed a 21% fall down in revenue and a 50% drop in earnings. Samsung had a similar performance in the Q1 of this year. Samsung announced in its Q1 earnings guidance that revenue for this quarter was about 52 trillion won, and the Operation profit was 6.2 trillion won, the profits plummeted 60% comparing to the Q1 in last year.

Samsung Electronics will release Q1 quarterly finance report for 2019 at the end of the month. They had issued Q1 revenue guidelines last week; it raised the warning of a decline in revenue and earnings. Refer to the released report, Samsung gave more accurate revenue and earnings information-the median Q1 revenue was 52 trillion won ($45.8 billion), ranging from 51 to 53 trillion won ($5.46 billion). The operating profit is around 6.2 trillion won; it is ranging from 6.1 to 6.3 trillion won.

Whether comparing by month-on-month or year-on-year, the Q1 revenue and earnings of Samsung has fell sharply, the revenue in Q1 is 52 trillion that is down 12% comparing to 59.27 trillion won in the Q4 quarter of 2018. It was down 14 per cent from 60.56 trillion won in the Q1 quarter of 2018 compared with the same period this year. 

Compared with the decline in revenue, the operating profit of Samsung seriously plummeted, the operation profits in the Q1 and Q4 of 2018 was 15.64 trillion and 10.8 trillion won respectively, while Samsung's operation profit in the Q1 this year fell 60% comparing to last year and dropped 42% comparing to the same month in last year. 

As for the reason for the collapse in earnings, Samsung has previously explained that the NAND Chip and OLED panel business is declining. It is considering that the semiconductor business has accounted for about 80 per cent of Samsung's total profits in the Q4, the DRAM memory chip among the semiconductor business accounted for the vast majority of the profits. Because the gross margin of Samsung on memory was as high as 70%, the impact of this round of memory declines on Samsung's earnings is crucial.

Although the decline of Memory storage industry reduces a lot of profits for the chip makers, the equipment suppliers such as GPS, Dash Cam, GPS and Mobile phones are happy for that, as their purchasing cost is going down a lot. Anyway, the memory industry is like the stock market, the price is changing quickly. Maybe we will see another peak for Memory industry soon.