Samsung Flags First Profit Drop in 2 Years on Weak Chip Demand

Samsung Flags First Profit Drop in 2 Years on Weak Chip Demand

Samsung Electronics expects to post a 29% drop in quarterly operating profit as demand for smartphones and memory chips slows.

Samsung - 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.

Samsung, in a regulatory filing, estimated profit at KRW 10.8 trillion ($9.67 billion) for October-December last year, down 29 percent from the same period a year earlier.

In a short press release, Samsung said the expected consolidated sales are approximately KRW59 trillion, while the operating profit should be around KRW10.8 trillion.

"We expect earnings to remain subdued in the first quarter of 2019 due to hard conditions for the memory business", it said.

"Under weak seasonality, memory earnings fell significantly Q-Q [quarter over quarter] due to weaker-than-expected demand amid inventory adjustments at data-center customers, resulting in a decline in shipments and a greater-than-expected decrease in [average sales price]", Samsung said in a statement accompanying its guidance.

Apple and Samsung announce plan to put iTunes on Samsung TVs; Disneyland announces raised ticket prices for its theme park for the second time in less than a year.

Samsung Flags First Profit Drop in 2 Years on Weak Chip Demand

The warning from the South Korean company added to concerns about the wider tech sector after Apple last week shook world markets when it said it was set to miss its latest revenue target thanks to a slowdown in China.

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

Shares in Samsung Electronics, the flagship subsidiary of the Samsung Group that dominates South Korea's economy, were down 1.68 per cent at the close.

Moving on to the reasons why, it seems the intensifying competition from Chinese rivals have affected the brand more than initially expected in the smartphone market.

While Samsung still leads the world in smartphone sales, it's being squeezed by Chinese handset makers like Huawei Technologies Co. This subsequently caused a larger-than-expected dip in prices.

But Lee was released from jail in February previous year after several of his convictions were quashed on appeal.

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