Samsung Electronics Co yesterday said its first-quarter results would fall short of market estimates as demand for memory chips waned, issuing a surprise profit warning ahead of preliminary earnings next month.
Prices for memory chips and displays fell more than expected, leading to the shortfall, the Suwon, South Korea-based company said in a statement.
The company, which has said it expects demand to pick up in the second half after customers work through their inventory, said that it would use its resources to maintain price competitiveness.
The warning from the world’s biggest chipmaker underscores a steeper-than-expected dive in component prices amid a stagnant smartphone market.
That is exacerbated by a global economic slowdown and US-China trade tensions that have hit demand for the semiconductors that account for most of Samsung’s profits.
Its shares fell less than 1 percent in Seoul trading. The stock had gained 18 percent this year through Monday’s close.
“Samsung’s trying to spread out the shock over its results,” said Song Myung-sup, an analyst at HI Investment & Securities Co. “Market watchers are bracing for a bad situation.”
Prices for dynamic random access memory (DRAM) slid almost 30 percent from the originally projected 25 percent in the first quarter, “resulting in the sharpest decline in a single season” since 2011, TrendForce said on March 5.
Inventory levels also continued to rise after overall contract prices dropped in the fourth quarter of last year, the research firm said.
Prices for computer memory have been hit by slower orders from data center owners, such as Amazon.com Inc and Alphabet Inc’s Google, which have accumulated stockpiles of unused parts.
PC shipments, another major end-use of memory chips, have also been limited by a shortage of processors from Intel Corp.
“Most DRAM suppliers are currently holding around a whopping six weeks’ worth of inventory,” TrendForce said. “The excessively high inventory will continue to cause down-corrections in prices this year if demand doesn’t make a strong comeback.”
Samsung competitors, such as Micron Technology Inc, have said that the current weakness is a low point for the memory industry and that, once the inventory has been worked through, demand and pricing would improve in the second half of this year.
Together with SK Hynix Inc and Micron, Samsung controls the bulk of the market for DRAM chips, used to store data on PCs and servers.
Samsung in January said that it was reducing spending this year to focus on the profitability of its memory operations after its net income slumped the most in two years.
Samsung usually provides an estimate of its revenue and operating profit days after each quarter ends. It then provides a full breakdown of its performance later in the same month, holding a conference call with investors.
“In the short term, the company will strengthen the differentiation of its products based on its technological leadership to improve the difficult business conditions, while seeking to improve the price competitiveness through efficient use of resources,” the company said in the statement.
Aside from its memorychip woes, Samsung has been struggling to stem a decline in its smartphone sales as consumers wait longer to upgrade their devices.
Its display division, which provides smartphone screens to Apple Inc, has also been hurt by lower-than-expected sales of iPhone devices and competition from Chinese makers of monitors and televisions.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his