Saturday, 19 January, 2019

Samsung expects sharp drop in fourth-quarter profit

Samsung Electronics is seen at its office building in Seoul Samsung Electronics is seen at its office building in Seoul South Korea
Laurie Berry | 11 January, 2019, 08:13

Samsung Electronics saw its operating profits nose-dive by almost 40 percent in the fourth quarter a year ago, mainly on weakening market demand for memory chips, the biggest source of its profits, the company said on January 7.

Samsung today predicted that its quarterly profit for the three-month period ending in December will be about 10.8 trillion Korean won, the equivalent of $9.67 billion. The operating profit decreased in the last quarter of the Year to 28.7 per cent compared to the previous year, reported Samsung on Tuesday in a preliminary estimate.

While Samsung still leads the world in smartphone sales, it's being squeezed by Chinese handset makers like Huawei Technologies Co.

With smartphone sales slowing and memory chip demand on the decline, industry analysts already expected a drop in profit for Samsung.

In its earnings guidance for Q4 18 Samsung Electronics advised that it expects sales of around 59 trillion Korean won and 10.8 trillion Korean won.

Samsung routinely releases estimated earnings figures before posting detailed results and elaboration toward the end of the month.

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The firm had seen earnings surge in recent years largely due to strong appetite for memory chips in mobile devices.

Smaller investment from data centres, a really bad smartphone market in China, and impact from the U.S.

Last week, Apple warned that its sales have been slowing, blaming economic weakness in China. Samsung did not provide net income, which it is to do later this month when it releases final results. The company produces memory chips for smartphones, computers and many other devices.

"Second- and third-tier Chinese smartphone makers saw drastic drops in their sales, which also took a toll on chip demand", said analyst Kim Young-woo analyst at SK Securities.

South Korea's semiconductor exports to China dropped for the first time in more than two years in December.

Despite the deteriorating market environment, Samsung expressed confidence that its profitability would recover in the second half. This is Samsung's lowest profit since Q1 of 2017. The world's largest smartphone maker by shipment has been increasingly dependent on chips for profit growth, riding on a spike in global data traffic while yielding to stiffer competition for phones.

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