[NewsSpace=JeongYoung Kim] Samsung Electronics, the leading company in Korea, has posted an unprecedented "earnings shock" due to the semiconductor downturn. Samsung Electronics' Q1 2023 operating profit was tentatively recorded at KRW 600 billion down 95.75% from the same period last year. It is the first time in 14 years since Q1 2009 that Samsung Electronics' quarterly operating profit has fallen below KRW 1 trillion.

According to the preliminary earnings announcements of each company, LG Electronics' operating profit in Q1 this year was KRW 1.4974 trillion. LG Electronics' performance is double that of Samsung Electronics, and it is the first time since the adoption of international accounting standards (IFRS) in 2009.

The 96% drop in Samsung Electronics' quarterly operating profit is due to the fallout from the memory industry's deteriorating situation, which has been a major support for the company's earnings, accounting for about 60-70% of its operating profit.

In the securities industry, it is estimated that Samsung Electronics' device solutions (DS) division, which is responsible for semiconductor business, had an operating loss of around KRW 4 trillion in Q1. Samsung Electronics, which has insisted that there is no artificial semiconductor reduction, has officially entered the reduction phase on this day.

On the other hand, LG Electronics received a relatively positive performance report, surpassing Samsung Electronics in terms of operating profit. Despite the still weak demand for appliances and TVs due to the global economic downturn, LG Electronics has improved its profitability by focusing on inventory management and reducing logistics and raw material costs.

LG Electronics said, "We have identified the market's demand for high efficiency and environmental friendliness early and provided competitive products, and strengthened our product lines in the volume zone, which shows the largest consumer demand." It also said, "We have made various efforts to maximize customer value, such as responding to the trend of preference for cost-effectiveness, which has contributed significantly to our solid performance."

The outlook for Q2 is also positive. Kim Ji-san, a researcher at Kiwoom Securities, said, "In the home appliances market, new appliances are taking the lead in increasing market share, with strong demand for premium products centered around North America." He added, "In the TV market, the recovery of demand for OLED TVs in Europe is positive, and the contribution of the platform business to profitability is taking off."

 

Looking at the preliminary results alone, Samsung Electronics has even allowed LG Energy Solution, which only has a battery business, to surpass it in operating profit by a slight margin. 

LG Energy Solution has reported a provisional operating profit of 633.2 billion won ($551.5 million) for the first quarter of this year, a 144.6% increase from the same period last year. This impressive performance means that the company has already earned more than half of its 2022 annual operating profit of 1.21 trillion won in just the first quarter.

This is not the end of Samsung's humiliation. It is highly likely that Hyundai Motor will take over the long-held position as the No.1 company with the highest quarterly operating profit for the first time.

Hyundai Motor's estimated first-quarter operating profit, within a month, is currently 2.858 trillion won, and Kia's estimated first-quarter operating profit is 2.3078 trillion won, which far exceeds Samsung Electronics' operating profit.