Samsung flags profit slump as Chinese rivals rise

Samsung flags profit slump as Chinese rivals rise

Samsung Electronics Co. said Tuesday its operating profit plunged 28.7 percent in the fourth quarter compared with a year ago due to weak memory demand, falling far short of market expectations. It's also roughly 29 percent lower than what Samsung reported during the same quarter back in 2017. "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.

Looking forward, Samsung said it expects earnings to "remain subdued in the first quarter of 2019 due to hard conditions for the memory business".

Revenue declined 7 percent over the year to 15.8 trillion won (14.1 billion US dollars) in the December quarter.

Samsung is considered a gauge for the technology sector and makes devices such as smartphones and other electrical appliances, and is also a supplier of components to some of the world's biggest companies. In late 2018 the DRAM market saw weaker demand and prices had begun to fall, as a class action lawsuit was issued against Samsung, Hynix, and Micron. Compounding that challenge is weakness at Apple, a major customer of components; the iPhone maker stunned global markets last week when it cut its sales outlook for the first time in nearly two decades. According to market research firm Counterpoint, in the third quarter, Samsung sales accounted for 1 percent of the Chinese market. Samsung did not provide net income, which it is to do later this month when it releases final results.

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The worse result of the biggest manufacturer of electronic memory chips and Smartphones, reinforces the Concerns about a slowdown in the world economy. Samsung doesn't expect the memory business to pick up much in the next quarter (analysts believe data center customers like Amazon, Microsoft, and Google have enough memory for the time being), but the company hopes for improvements in the second half of the year.

Samsung said it expected to boost its prospects with foldable and 5G handsets, relying on new technological advances to spark a turnaround.

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

Despite the deteriorating market environment, Samsung expressed confidence that its profitability would recover in the second half.

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