Wed, Jan 09, 2019 - Page 10 News List

Tech slowdown hurts Samsung

‘A SHOCK’:After a Q4 revenue hit of 11%, the firm expects profitability to recover in the second half of this year on phone launches and market improvement

Bloomberg

Samsung Electronics America senior vice president Yoon Lee, right, uses the “Family Board” on a refrigerator during a Samsung news conference at the CES expo on Monday in Las Vegas, Nevada.

Photo: AP

Samsung Electronics Co’s quarterly profit and revenue missed estimates on sputtering demand for memory chips during the last three months of last year, the same period when Apple Inc saw anemic sales in China.

The South Korean company’s operating income fell to 10.8 trillion won (US$9.59 billion) in the quarter that ended last month, according to preliminary results released yesterday, falling short of the 13.8 trillion won average of analysts’ estimates compiled by Bloomberg.

Deteriorating relations between the US 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.

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 almost two decades.

“It’s a shock,” Hi Investment & Securities Co analyst Song Myung-sup said of Samsung’s results. “It’s not just Apple, but also smartphone, server and PC manufacturers that are not buying. While the US-China trade dispute hangs over them, these customers just won’t accept current prices, and Samsung faces pressure to cut chip prices.”

Fourth-quarter revenue fell 11 percent to 59 trillion won, compared with the 63.6 trillion won average projection compiled by Bloomberg. Samsung did not provide net income, which it is to do later this month when it releases final results.

Samsung’s shares fell 1.7 percent before in Seoul. The stock dropped 24 percent last year.

Memory chips account for the biggest portion of Samsung’s profit. Contract prices for 32-gigabyte DRAM server modules fell about 5 percent last quarter, according to InSpectrum Tech Inc. Prices for 128 gigabit MLC NAND flash memory chips fell about 3.4 percent.

Apple’s surprise cut to its sales forecast suggested a worsening outlook for orders. Apple receives memory chips and smartphone screens from Samsung and is the South Korean manufacturer’s biggest customer, according to data compiled by Bloomberg.

Samsung said it expects earnings to remain subdued in the first three months of the year due to difficult conditions for memory.

Profitability is to recover in the second half on projected improvements in the market, with rising adoption of new central processing units and launches of new smartphone products, it added.

While Samsung still leads the world in smartphone sales, it is being squeezed by Chinese handset makers such as Huawei Technologies Co.

The South Korean company is pinning its hopes on a foldable-screen phone that it plans to ship this year, along with a flagship Galaxy S10 model that is said to feature an in-display fingerprint sensor and a near-zero bezel.

While sales of its own devices have foundered, the company supplies organic light-emitting diode screens for Apple and Huawei. Samsung’s liquid-crystal display televisions are facing increasing challenges from Chinese rivals that seek to crowd out South Korean products.

“Recovering demand in the first quarter cannot be expected, because it is a seasonally low period and customers also know prices are coming off, so there’s no rush to buy,” said Sanjeev Rana, a South Korean technology analyst at CLSA Ltd. “In the second quarter Samsung launches the Galaxy S10 and a lot of other Android makers announce new model launches that might help smartphone demand and enhance the demand for DRAM.”

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