Samsung Electronics flags near-30% slump in Q4 operating profit

Irving Hamilton
January 8, 2019

The firm had seen earnings surge in recent years largely due to strong appetite for memory chips in mobile devices.

In a statement on Tuesday, the firm cited lacklustre demand and rising competition for its darkening outlook.

It also estimated an 11 percent on-year revenue decline at KRW 59 trillion.

Samsung is blaming the decline in its memory chip business.

Samsung withholds net profit and sector-by-sector business performance data until it releases its final earnings report, which is expected later this month. The company has reportedly experienced lower-than-demand for memory chips from its data centre customers, according to CNBC.

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. These numbers are down respectively 38% and 10% from the previous quarter, while on a yearly basis, sales declined 28% and profit is down 10%.

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A man tries out a Samsung Electronics' Galaxy Note 9 at its store in Seoul, South Korea Jan. 7, 2019.

Analysts say that Apple's woes and Samsung's are indicative of tougher times ahead for global businesses, as dismal growth in the world's second-largest economy, exacerbated by a long China-US trade war, takes a toll. "But these Samsung results are quite damning suggesting there".

While Samsung leads the global smartphone market with a 20 percent share, it faces mounting competition from Chinese rivals like Huawei - which surpassed Apple to take second place a year ago - offering quality devices at cheaper prices.

"Samsung is losing ground to Huawei, Xiaomi and other Chinese rivals in the huge China and India markets", Neil Mawston, executive director at market researcher Strategy Analytics, said in a report.

"Recovering demand in the first quarter can not 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 Korea technology analyst at CLSA."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". Its smartphones are also facing greater competition.

The 50-year-old scion was a key figure in the scandal that ousted former South Korean President Park Geun-hye following massive nationwide protests, and was sentenced to five years in jail last year.

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