Samsung struggles over memory and display business, Q1 profit drops by ~60%

Samsung electronics’ Q1 report revealed an almost 60% decline in profits compared to last year, as the tech giant continued to grapple with its display and memory business. Its operating margin declined from last year’s 15.64 trillion to 6.2 trillion Korean won ($5.5 billion) till March, missing analysts’ estimates of 6.8 trillion won. This is, however, not surprising as the South Korean tech giant had already expressed warning last month.

Lack of demand from data center companies buying memory chips as well as declining smartphone sales have impacted sales of Samsung’s memory chips. But it is already known that the entire semiconductor industry has been struggling over these issues. Analysts’ further express concerns over the persistence of these problems for the next quarter as well, with a slim opportunity that it may improve from the second half of the year.

According to the executive director, the weaker-than-expected operating profit number could be explained by a likely one-off provision in cost for Samsung’s memory business. As far as its display business is concerned, LCD panel prices fell sharply due to competition from the Chinese competitor’s coupled with a decline in the OLED display screens used in high end smartphones like Apple (AAPL) iPhone.

But there still may be some good news for Samsung--its 5G potential. The company has rolled out its new Galaxy S10 5G smartphones in its home market on Friday. This could be meaningful as it also sells chipsets and network equipment required to build out that 5G technology. The company is set to launch the Galaxy S10 5G in the U.S. with Verizon (VZ).