DRAM Pricing Debacle Hits Samsung

By Douglas A. McIntyre Published Apr 13, 12:22PM EDT

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Samsung posts weak Q1 on chips, outlook tough – Yahoo! News

Samsung Electronics Co. Ltd. (005930.KS), the world’s top memory chip maker, posted a slightly bigger-than-expected 15 percent drop in first-quarter earnings as margins tumbled, and predicted more price pressure to come.
The April-June outlook remains grim as Samsung, the most valuable technology company outside the United States, forecast a further 5-10 percent drop in DRAM (dynamic random access memory) prices in the second quarter.

But it said the second quarter would represent a bottom for DRAM profitability, and analysts expect Samsung’s earnings to improve in the second half as seasonal demand for consumer electronics picks up.

January-March operating margins on chips slumped to 12 percent from 31 percent in the previous quarter and 26 percent a year earlier. The division’s operating profit fell 52 percent from a year ago and 67 percent from the prior quarter.”DRAM and NAND prices fell so sharply that they offset our cost reduction efforts,” Lee Keon-hyok, vice president of investor relations at Samsung, said in a conference call on Friday.

Prices for NAND flash chips, widely used in portable electronic gadgets, should rise 20-25 percent in April-June after falling more than 40 percent in the first quarter, Samsung said.

It is yet another piece in the supply puzzle. We aren’t expecting such a rapid recovery.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.