By JUNG-AH LEE And EVAN RAMSTAD
SEOUL—The Samsung Electronics Co. executive who will lead its newly merged component-manufacturing businesses said that the second half of the year is going to more difficult than the first.
The two businesses—producing semiconductors and flat-panel displays—last year provided 70% of Samsung's operating profit, but both are experiencing difficulties, said Kwon Oh-hyun. The chief of Samsung's chip business, he was tapped to lead the combined unit, to be called its Device Solutions business.
"In the past, the semiconductor market tended to be weaker in the first half and stronger in the second half, but for this year, it is likely to remain flat throughout the latter half," Mr. Kwon said in remarks to Korean reporters that were later confirmed by a company spokeswoman.
The flat-panel business, meanwhile, is going through a protracted cyclical downturn, he said. The business experienced an operating loss in the first quarter and analysts believe it did again in the second quarter, which ended last Thursday.
Samsung will provide guidance on second-quarter results later this week and release a full report in late July. The company faces a tough comparison. Its second-quarter operating last year was a record 5.01 trillion won ($4.7 billion). Analysts expect the number to be down to around 4 trillion won for the just-ended period.
The second half of a year is typically strong for technology companies; with the resumption of school and then the year-end holidays, sales tend to pick up for electronic gadgets, and so for their components. Since the second half of last year, however, memory-chip prices have been steadily falling due to a supply glut.
Mr. Kwon's comments came a month after the chief financial officer of Hynix Semiconductor Inc., another major maker of memory chips, said second-quarter operating profit was likely to fall slightly short of forecasts.
Most of Samsung's flat-panel production is of liquid crystal displays, or LCDs, which have been in a downturn since the middle of last year as new factory starts have created more capacity. The scheduled opening of even more LCD factories in China next year, coupled with continuing weakness in the global economy that has damped demand for TVs, is expected to continue weighing down flat-panel manufacturers.
Combining the chip and LCD businesses positions Samsung, the world's largest technology manufacturer by revenue, to address a larger structural issue that executives rarely discuss: that the customers of its component businesses compete with the other divisions of Samsung, which make cellphones, TVs, computers and other consumer-electronics gadgets.
The strain recently became visible in relations with the biggest customer of its component divisions, Apple Inc., which in April sued Samsung alleging that its cellphone operation copied designs of Apple's products.
Samsung countersued in the U.S. and five other countries. On Thursday, it dropped the first countersuit, filed in the same California district court where Apple filed its initial suit, after a judge recommended that Samsung use that original Apple suit to make its case. In its filing dropping the countersuit, Samsung cited "judicial and administrative efficiency" and an intention to "raise patent infringement" as part of its defense.—Ian Sherr in San Francisco contributed to this article.
Write to Evan Ramstad at firstname.lastname@example.org