Arthur J. Villasanta – Fourth Estate Contributor
Seoul, South Korea (4E) – Just week after Apple, Inc blamed China’s weakening economy for a huge drop in sales and revenues, Samsung Electronics Co, Ltd yesterday followed suit by echoing a similar plaint.
In a regulatory filing, Samsung estimated its profit at $9.67 billion for its fourth quarter (October to December) 2018, 29 percent lower year-on-year. The South Korean firm also estimated revenues might drop 11 percent on-year to $52.4 billion.
Samsung blamed “lackluster demand in the memory business and intensifying competition in the smartphone business” for the dismal Q4 outlook.
“Memory earnings fell significantly … due to weaker-than-expected demand amid inventory adjustments at data-centre customers,” which led to a “greater-than-expected” drop in chip prices, said Samsung in a statement.
“We expect earnings to remain subdued in the first quarter of 2019 due to difficult conditions for the memory business but strengthen in the second half.”
On the upside, Samsung’s has a rosier outlook for the full year of 2018. It expects operating profit to hit $52.4 billion, up nearly 10 percent from 2017. Sales are forecast to improve slightly by 1.6 percent to $217 billion.
Analysts, however, expect Samsung’s profit to decline through 2019 as China’s economy continues to slow down. They also note the worsening supply and demand conditions for semiconductors and the structural challenges facing Samsung’s smartphone business will drag down the firm’s profits throughout 2019.
“If Apple’s not selling, then is it Samsung that’s selling well? It is not. The smartphone market is already saturated,” said Greg Roh, senior analyst at Hyundai Motor Securities.
Samsung is the world’s leading smartphone brand, and is also the world’s largest maker of memory chips.
Demand for DRAM memory chips will hit a low in the fourth quarter of 2019, according to some analysts. Prices for DRAM chips dropped 10 percent in the fourth quarter. Prices of NAND flash memory chips fell 15 percent.
Analysts expect memory chip prices to fall 10 percent on average in the first quarter of 2019, adding to Samsung’s woes.
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