Samsung Electronics Co, the world’s biggest smartphone and memorychip maker, yesterday reported a slump in fourth-quarter net profits, blaming a drop in demand for its key products.
Net profits in the October-to-December period were 8.46 trillion won (US$7.6 billion), it said, down 31 percent year-on-year.
The firm is the flagship subsidiary of Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world’s 11th-largest economy, and it is crucial to South Korea’s economic health.
“Unfavorable business and macroeconomic factors led to slower performance in the final quarter,” Samsung Electronics said in a statement, when “earnings were affected by a drop in demand for memory chips used in data centers and smartphones.”
It said that demand for chips would likely stay weak in the January-to-March period, “due to seasonality and macroeconomic uncertainties..
Weakening overseas demand for memory chips — one of South Korea’s key trade items — is bad news for its export-driven economy.
Bank of Korea Governor Lee Ju-yeol last month said that Asia’s fourth-largest economy could face a “considerable burden if the prolonged downturn continues in the semiconductor industry.”
Samsung Electronics’ fall in net profit came as China’s economic growth slows, exacerbated by a trade dispute with the US.
The company barely mentioned China in its earnings statement, but pointed to “global economic volatility” as a cause for “rapidly shrinking” chip demand.
Its display businesses would be hit by “slow sales of premium smartphones,” increasing competition, and “large-scale capacity expansions in the industry,” Samsung Electronics said.
For the full year, the firm reported record net profits of 44.3 trillion won, up 5.1 percent.
However, it said that overall earnings are expected to fall this year, “due to weaker performance by the memory business.”
The net profit figure came in below analysts’ estimates, according to Bloomberg News.
Samsung Electronics shares closed down 0.54 percent.
Greg Roh of HMC Securities & Investment said that “sluggish” sales of DRAM chips — used in computers and servers — and weaker prices were behind Samsung Electronics’ “weak” fourth-quarter performance.
“The first half of this year will be even more challenging,” Roh told reporters, projecting operating profits to fall more than 30 percent year-on-year during the period.
Samsung Electronics confirmed that it would roll out foldable smartphones and 5G devices this year.
It said it was “reorganizing” its mass-market line-up “to better promptly respond to rapid changing market trends and the needs of target customers.”
While it leads the global smartphone market with a 20 percent share, “Samsung is losing ground to Huawei (華為), Xiaomi (小米) and other Chinese rivals in the huge China and India markets,” said Neil Mawston of Strategy Analytics in a report after Samsung flagged the figures earlier this month.
Last month, it announced the closure of its factory in Tianjin, China.
Samsung Electronics is not the only tech giant troubled by weak Chinese sales.
Apple Inc said in an earnings report on Tuesday that its revenue plunged almost 27 percent in the Greater China region in the most recent quarter.
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