Samsung Warns of Profit Decline Due to Lower Demand for Memory

Samsung leads the global smartphone market with a 20 percent share

Samsung leads the global smartphone market with a 20 percent share

It was now expecting to report operating profit of 10.8tn Korean won (£7.5bn) for the fourth quarter of 2018, down 29% on a year earlier and missing analysts' expectation of 13.2tn won (£9.2bn).

Earnings calls are not something we normally keep a close eye on here at Ausdroid but when you see the biggest brand in Android drop 29 percent compared to the same time past year you sit up and take notice.

While its chip business is usually the firm's shining light, it has suffered in the face of weakened demand from data center customers.

This headwind continued to buffet the industry in the fourth quarter, with overall sales in the world's top smartphone market China falling 8 percent in the preceding three months, according to Counterpoint Research.

Deteriorating relations between the USA and China - Samsung's two biggest export destinations - has hit demand for memory used in everything from personal computers to mobile devices, raising the pressure on a company struggling to revitalize its smartphone business.

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

Samsung said a "stagnant and fiercely competitive" mobile market had weighed on earnings as marketing spend rose but smartphone sales volumes remained flat. Prices for 128 gigabit MLC NAND flash memory chips fell about 3.4 percent.

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The company wants to take advantage of demand for electric vehicles in the world's biggest auto market. China has raised import duties on US-made cars as part of the broader trade fight with the US.

DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019. This is the first time they have commented on an earnings report since 2014.

Turns out Apple is not the only company expecting to disappoint investors with its next set of quarterly results - Samsung and LG are in the same boat.

While Samsung leads the global smartphone market with a 20 percent share, it faces mounting competition from Chinese rivals like Huawei - which surpassed Apple in second place previous year - offering quality devices at cheaper prices.

"It's a shock", Song Myung-sup, an analyst at Hi Investment & Securities Co., said of Samsung's results.

"You see, Apple's iPhones are already losing sales in China".

Canadian police arrested Meng Wanzhou, chief financial officer of Huawei, on December 1 at the request of the United States. The firm has said it was not aware of any wrongdoing. The wider market was up 0.1 percent rise.

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