Samsung Elec flags first profit drop in 2 years

Ivan Schwartz
January 11, 2019

One factor behind troubles at the company is the lower sales projections from Apple, a major Samsung memory and smartphone screen buyer-for which a wide variety of explanations have been proposed including the ongoing U.S.

The South Korean tech giant - the world's top maker of smartphones and memory chips - has enjoyed record profits in recent years despite a series of setbacks, including a humiliating recall and the jailing of its de facto chief.

Just as LG has multiple divisions, Samsung is heavily invested in DRAM, NAND and display technologies which they supply to companies such as Apple. The mobile unit stayed in the red since the second quarter of 2017. Samsung also noted that demand for DRAM from datacenters was lower than expected, this makes up 30% of their DRAM business.

The world's second-biggest television set maker behind compatriot Samsung Electronics Co Ltd 005930.KS estimated profit of 75.3 billion won (52.5 million pounds) for October-December a year ago.

The tech heavyweight said weaker-than-expected demand for memory chips from data center customers led to a decline in shipments and a notable drop in memory chip prices. "China trade war have all hit Samsung's chip business", Kim said.

"Apple's iPhones have not been selling well in China".

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DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019.

Samsung's shares fell 1.7 percent before in Seoul.

This would represent Samsung's first quarterly operating loss in two years, thanks in part to an economic slowdown in China that's drying up interest in Samsung's handsets there.

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

Analysts are saying that Samsung may have to reduce its chip production capacity if it is to achieve a recovery in the second half considering the pressure the company and its smaller rival SK hynix face to cut chip prices.

Later on Tuesday, domestic peer LG Electronics Inc also flagged a drop in quarterly profit, with analysts pointing to increased marketing spending on smartphones as well as worse-than-expected sales of home appliances such as refrigerators in regions including China.

Other reports by GizPress

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