Samsung Earnings Tumble With Memory, Smartphone Demand

Jung Yeon-je  AFP  Getty Images

Jung Yeon-je AFP Getty Images

Marketing expenses as well as flat sales volumes have impacted Samsung's profitability.

Last week Apple said it expected to earn $84 billion in October-December, well down from the $89-$93 billion previously forecast as it blamed a steeper-than-expected "economic deceleration" in China and emerging markets. Its memory and processor chips account for over three-quarters of overall profit and about 38 percent of sales.

Samsung, due to publish preliminary fourth-quarter results on January 8, is expected to see a 12 percent year-on-year drop in operating profit to 13.3 trillion won ($11.85 billion) for the period, I/B/E/S data from Refinitiv shows.

In its earnings guidance for Q4 18 Samsung Electronics advised that it expects sales of around 59 trillion Korean won and 10.8 trillion Korean won.

The warning, which comes ahead of Samsung's latest financial results later this month, will spark new fears of a slowdown in the tech market which has already seen precipitous drops in many companies' share prices. Two of its largest competitors, Samsung and LG, have reported lower-than-expected sales for the same period ending in December 2018. It did not disclose the customers or elaborate on the macro uncertainty.

"Smaller investment from data centers, a really bad smartphone market in China, and impact from the U.S".

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As for the smartphone market, Samsung said it expects to boost its prospects with foldable and 5G handsets.

Samsung shares lost 24 per cent previous year, capping its worst performance since 2000, as the stock took a beating from sliding chip prices and a slowdown in fresh smartphone demand.

Prices for DRAM chips, which provide devices with temporary workspaces and allow them to multitask, declined 10 percent in the fourth quarter, according to industry tracker DRAMeXchange.

Samsung is now the world's leading manufacturer of NAND flash memory chips and DRAM chips, which provide devices with temporary workspaces and allow them to multitask.

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

"Samsung is losing its ground to Chinese rivals, such as Huawei and Xiaomi that offer reasonably priced smartphones, not only in the domestic market, but also in Southeast Asia and European countries", said Jia Mo, a research analyst with technology consultancy Canalys. Many models are cheaper than those made by Apple and Samsung.

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