Samsung Electronics flags profit drop on weak chip demand
SEOUL (Reuters) – South Korea’s Samsung Electronics Co Ltd on Tuesday estimated a 29 percent drop in quarterly operating profit, its first decline in two years, as it flagged tough memory chip and mobile phone markets in a rare commentary.
Weaker earnings at the world’s biggest maker of smartphones and semiconductors adds to worries for investors already on edge after Apple Inc last week took the rare move of lowering its quarterly sales forecast, citing poor iPhone sales in China.
Samsung, in a regulatory filing, estimated profit at 10.8 trillion won ($9.67 billion) for October-December last year, down 29 percent from the same period a year earlier. That compared with the 13.2 trillion won average of 26 analyst estimates in a I/B/E/S Refinitiv poll.
It also estimated an 11 percent on-year revenue decline at 59 trillion won.
The company does not usually explain the details behind its estimates, but on Tuesday issued a background statement along with its fourth-quarter earnings guidance to “ease confusion” among investors as its estimate was far below market forecasts.
“We expect earnings to remain subdued in the first quarter of 2019 due to difficult conditions for the memory business,” it said.
Samsung will disclose detailed earnings later in January.
Analysts expect Samsung’s profit to decline through 2019 as a slowing Chinese economy erodes demand for its chips and handsets.
(GRAPHIC: Memory prices on their way down – tmsnrt.rs/2GZzcil)
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.
Prices of NAND flash memory chips, which hold data permanently, slipped 15 percent.
DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019.
(For an interactive graphic on memory chip prices, click tmsnrt.rs/2GYDer8)
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