Samsung warns of sales and profit decline

Jung Yeon-je  AFP  Getty Images

Jung Yeon-je AFP Getty Images

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

In a rare move for Apple, meanwhile, last week the company walked back its sales expectations for the last quarter of 2018, citing flagging sales in China. Marketing expenses as well as flat sales volumes have impacted Samsung's profitability. "Demand for IT products in China and other emerging markets is also poorer than expected". That's a 38.5 percent drop from the prior quarter.

Samsung today predicted that its quarterly profit for the three-month period ending in December will be about 10.8 trillion Korean won, the equivalent of $9.67 billion.

Fourth-quarter revenue fell 11 percent to 59 trillion won, compared with the 63.6 trillion won average projection compiled by Bloomberg.

Samsung withholds net profit and sector-by-sector business performance data until it releases its final earnings report, which is expected later this month.

Samsung said it expected to boost its prospects with foldable and 5G handsets, relying on new technological advances to spark a turnaround. It did not disclose the customers or elaborate on the macro uncertainty.

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On the whole, analysts expect Samsung's profit to decline through 2019, with a slowing Chinese economy eroding demand. Weak demand in the memory division caused the profits to decrease sharply, Samsung said. The memory chip business was also hit by a drop in prices, the company said.

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

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. Many models are cheaper than those made by Apple and Samsung.

"You see, Apple's iPhones are already losing sales in China. That's even worse for Samsung because that would drag its chip prices down", Roh said, referring to Apple as a Samsung chip client.

Smartphone vendors shipped 355.2 million units during the third quarter of 2018, resulting in a year-on-year decline of 6 per cent, according to Massachusetts-based International Data Corporation (IDC).

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