Samsung Electronics' Q4 net profit falls 38%

Samsung shares slid over 3% after the world's biggest memory chip and smartphone maker could only give a guarded outlook on future chip demand, as it announced a 34% drop in quarterly operating profit.
Attendees at the 2020 Consumer Electronics Show in Las Vegas looking at a foldable Samsung smartphone on Jan 8. Samsung Electronics suffered a series of difficulties last year, with the global memory chip market hit by rising supply and falling deman
Attendees at the 2020 Consumer Electronics Show in Las Vegas looking at a foldable Samsung smartphone on Jan 8. Samsung Electronics suffered a series of difficulties last year, with the global memory chip market hit by rising supply and falling demand amid a fiercely competitive market.PHOTO: AGENCE FRANCE-PRESSE

Smartphone maker blames falling chip prices, weakening demand in key goods

SEOUL • The world's biggest smartphone maker, Samsung Electronics, reported a slump in fourth-quarter net profit yesterday, blaming weakening demand in key products and falling chip prices.

Net profit in the October-to-December period was 5.23 trillion won (S$6 billion), down 38 per cent from a year ago, it said in a statement.

"Fourth-quarter profit dropped from a year earlier due to the continued fall in memory chip prices and weakness in display panels," Samsung said.

The firm is the flagship subsidiary of the giant Samsung Group, by far the largest of the family-controlled conglomerates, known as chaebols, that dominate business in the world's 12th-largest economy.

But it suffered a series of difficulties last year, with the global memory chip market - which has driven profits in recent years - hit by rising supply and falling demand.

The premium smartphone market has also grown fiercely competitive, with buyers waiting longer before upgrading to new models.

Samsung said it expects "weak sales from seasonality in memory chips, OLED and consumer electronics" in the first quarter of this year as the firm navigates "continued uncertainties in the global business environment".

Operating profit dropped more than 30 per cent year on year to 7.2 trillion won, while sales in the fourth quarter stood at 59.9 trillion won. For full-year 2019, the firm reported net profit of 21.7 trillion won, down 51 per cent from a year ago.

Samsung shares closed down 3.2 per cent in Seoul.

Samsung has been strained by a trade war between China and the United States and caught in a diplomatic row between Seoul and Tokyo over wartime history, with Japan imposing tough restrictions on exports crucial to South Korean tech giants in July.

In another shadow hanging over the firm, its vice-chairman and de facto leader Lee Jae-yong is on trial for the second time over a sprawling corruption scandal that led to the impeachment of South Korea's former president Park Geun-hye.

A guilty verdict and long prison sentence would deprive the firm of its top decision-maker. Lee was initially jailed for five years in 2017 on multiple charges including bribery, then released after several of his convictions were quashed, only for the Supreme Court in August to order a retrial.

In the mobile business, strong demand for Samsung's mid-range A-series handsets gave the firm a much-needed boost over the last few quarters, said Mr Gerrit Schneemann, a senior analyst at IHS Markit. The premium devices, such as the latest Galaxy Note that was widely available in the fourth quarter, faced competition from Apple - which reported its best-ever quarter powered by the new iPhone 11 and iPhone 11 Pro models.

"A strong quarter from Apple in key markets will have had an impact on Samsung," Mr Schneemann told Agence France-Presse.

This year, Samsung is pinning its hopes on increasing availability of 5G telecom services driving sales of its handsets - it is a world leader in the technology - and said it will roll out an "enhanced" 5G line-up.

Global demand for the superfast 5G handsets last year was higher than expected, with nearly 19 million units shipped worldwide, according to the latest data from market researcher Strategy Analytics.

Samsung held 36 per cent of market share, it said, closely trailing Huawei, which was leading the tight race with 37 per cent, although most of its shipments were in China, where US sanctions made relatively less impact.

"Samsung's 5G smartphone shipments are international and span a wide spread of countries, from South Korea to the UK to the United States," said Mr Ville-Petteri Ukonaho, associate director at Strategy Analytics.

Mr Schneemann added that Samsung will see more competition this year with rivals releasing devices in "diverse pricing segments", but said its "broad portfolio and global reach" will keep the firm in the lead.

Samsung is due to unveil new Galaxy devices next month that it said - without offering details - will "shape the next decade of mobile experiences".

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on January 31, 2020, with the headline 'Samsung Electronics' Q4 net profit falls 38%'. Print Edition | Subscribe