Samsung profit and sales miss estimates on technology slowdown

Gladys Abbott
January 9, 2019

Semiconductors now account for more than three-quarters of Samsung's total profit, compared with the first quarter of 2013 when its phone business represented nearly three-quarters of profit. Both LG and Samsung will disclose detailed earnings later this month.

Sales dropped more than 10 percent to 59 trillion won in the period, Samsung said.

Analysts said likely causes included profit margins for its high-end TVs being thinned by increasing competition, while the firm's smartphone business continues to lose money.

Samsung Electronics on Tuesday flagged its first quarterly profit drop in two years, painting a grim outlook amid mounting competition from Chinese smartphone makers and declining chip prices.

Samsung make memory and processor chips for companies including Apple and Huawei phones with these sales accounting for close to 40 percent of their overall sales.

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

"You see, Apple's iPhones are already losing sales in China".

The South Korean chipmaker said there's weak global demand for its products amid a global economic slowdown that's being driven, in part, by a almost year-long trade war between the US and China.

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Prices for DRAM chips, which provide devices with temporary workspaces and allow them to multi-task, declined 10 percent in the fourth quarter, according to industry tracker DRAMeXchange.

Samsung's shares fell as much as 2.1 percent before paring losses at midday in Seoul.

"The most important thing from here is for the pace of decline in chip prices to slow, which I expect will happen in the second quarter".

The world's second-biggest television set maker behind compatriot Samsung Electronics Co Ltd estimated profit of 75.3 billion won (US$67.03 million) for October-December past year.

Prices of NAND flash memory chips, which hold data permanently, slipped 15 percent.

The announcement comes on the heels of Apple's earnings warning - its first since 2002 - in which CEO Tim Cook said in a letter to investors that the iPhone maker expects first-quarter revenue of about $84 billion, down from the previous guidance of between $89 billion and $93 billion.

DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019.

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