Monday, 25 March, 2019

Samsung announces Q4 2018 earning guidance, operating profit down 29%

Samsung expects sharp drop in fourth-quarter profit Samsung warns of profit drop as chip demand slows
Priscilla Morrison | 08 January, 2019, 17:30

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

Deteriorating relations between the USA and China - Samsung's two biggest export destinations - has hit demand for memory used in everything from personal computers to mobile devices, raising the pressure on a company struggling to revitalize its smartphone business.

"We expect earnings to remain subdued in the first quarter of 2019 due to hard conditions for the memory business", the South Korean tech giant said in a statement.

Samsung is blaming the decline in its memory chip business.

Sales for the period were down more than 10% to 59tn won (£41bn). The company has reportedly experienced lower-than-demand for memory chips from its data centre customers, according to CNBC.

"If Apple's not selling, then is it Samsung that's selling well? And China's overall smartphone market is stalled and declining, which will affect not only Apple but Samsung", Song Myung-sup, a senior analyst at HI Investment & Securities, told Reuters.

More news: AMD’s Stock Spikes by 11 Percent After Announcement of Partnership with ConsenSys

"Apple's iPhones have not been selling well in China at least since Huawei's chief finance officer was arrested".

Huawei CFO Sabrina Meng was arrested in December in Canada at the request of the United States in relation to Iran-related transactions. U.S. prosecutors have accused Meng of misleading banks about transactions linked to Iran, putting the lenders at risk of violating Washington's sanctions. Samsung didn't provide net income, which it will do later this month when it releases final results. These numbers are down respectively 38% and 10% from the previous quarter, while on a yearly basis, sales declined 28% and profit is down 10%.

"Amid a stagnant and fiercely competitive market, mobile profits declined due to increased marketing expenses under strong seasonality and a flat smartphone sales volume", Samsung said.

As for the smartphone market, Samsung said it expects to boost its prospects with foldable and 5G handsets. 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.

It also took another hit after the bribery conviction of Lee Jae-yong - the son and heir of the group's ailing current Chairman Lee Kun-hee.

But Lee was released from jail in February a year ago after several of his convictions were quashed on appeal.

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