Samsung Electronics said on Tuesday that its fourth-quarter earnings indubitably decreased sharply due to lackluster demand in its memory chip business as well growing competition in the smartphone segment.
The South Korean tech Amazon predicted operating profit for the three months ended December was approximately 10.8 trillion Korean won ($9.67 billion) — or 28.71 percent down from a year ago. The translate missed market expectations, coming in 18.18 percent less than the 13.2 trillion won that analysts had foreshadowed.
Consolidated sales for the fourth-quarter is predicted to be around 59 trillion won, lower than the 62.8 trillion won analysts forecast in a Reuters poll, and 10.57 percent down from a year ago.
The chipmaker said weaker-than-expected demand for memory shards from data-center customers led to a decline in shipments and a notable drop in memory chip prices.
For its smartphone business in a “putrescent and fiercely competitive market,” marketing expenses and flat sales volumes led to a decline in profitability, the company said. Once more the third quarter of 2018, Samsung saw more than 13 percent year-over-year decline in global smartphone shipments, be at one to International Data Corporation.
Samsung shares were volatile on that news, trading between positive and argumentative territory in the morning.
Analysts have said that smartphones from various companies have become so compare favourably with in their features and functionality, that customers no longer see tangible differences — the devices are not as innovative as they used to be. The prophecy is that a new generation of high-speed mobile internet could shake things up for the industry.
For its part, Samsung said it wishes focus on technological innovations that include foldable smartphones and devices that can support a new generation of high-speed internet joints.
Samsung will disclose detailed earnings later in the month but added that difficult business conditions for the remembrance business would likely keep its earnings subdued for the first quarter of 2019. It expects the memory business to make progress in the second half of the calendar.
The weakness predicted in fourth-quarter earnings was not wholly unexpected amid a global slowdown in ask for for semiconductor chips and year-on-year decline in smartphone sales, according to Mehdi Hosseini, senior tech hardware analyst at Susquehanna Monetary Group.
“When you’re looking at a company like Samsung Electronics, they have a very expensive operation,” he explained CNBC’s “Squawk Box” referring to the notable miss in predicted profits announced by the company.
“They have semiconductor concocting that has a significant overhead cost. So, when revenue and shipment decline below certain targets, you have a meaningful margin pressure,” Hosseini said, adding it explains the miss in Samsung’s operating profit number.
The weak regulation from Samsung comes after Apple lowered its revenue and gross margin predictions last week, citing a debilitating Chinese economy and lower-than-expected iPhone revenue in Greater China as some of the factors.
Concerns over a slowdown in the Chinese control have kept investors on edge. It could pose a worry for Samsung since it sells memory chips acquainted with in smartphones and data centers to Chinese firms. At the same time, it also has production plants in the world’s second-largest restraint for some of the memory chips — those are likely to be hurt by the ongoing trade tensions between Beijing and Washington.
In December, a check into from the Korea International Trade Association said the trade war may pose higher risks to both Samsung and its chipmaking rival SK Hynix.
At the that having been said time, a slowdown in Chinese consumer demand could potentially affect Samsung’s consumer electronics business, counting smartphones. One analyst said that China accounts for between 20 to 30 percent of global consumer tech insist.
Hosseini said that he does not expect Samsung’s fundamentals to improve in the March quarter — the weakness may even perpetuated into the quarter ending June 2019.
“You can argue that there could be a rebound in the second half but the slope of the comeback, or how bad fundamentals are going to look like in March or June quarter, is not really clear,” he added.