Samsung sees gradual chip rebound in 2020 after Q4 profit plunge

Samsung, the world's biggest memory chip and smartphone maker, reported operating profit of 7.16 trillion won (S$8.34 billion).
Samsung, the world's biggest memory chip and smartphone maker, reported operating profit of 7.16 trillion won (S$8.34 billion).PHOTO: REUTERS

SEOUL (REUTERS) - Samsung Electronics said on Thursday (Jan 30) it expects earnings to bounce back in 2020 after a fourth-quarter slump, helped by a gradual recovery in memory chip demand from data centre customers and 5G smartphone makers.

The cautiously optimistic outlook from the world's biggest memory chip and smartphone maker draws a line under its worst year since 2015. It also echoes positive guidance from peers like Intel and TSMC, signalling a rebound in chip prices after a lengthy slide.

The South Korean conglomerate reported operating profit of 7.16 trillion won (S$8.25 billion), down 34 per cent and in line with its own previous estimate. Net profit fell 38 per cent to 5.2 trillion won, with revenue easing 1 per cent to 59.9 trillion won - also meeting estimates.

"Looking ahead to 2020, Samsung expects improvements in overall business performance but also sees continued uncertainties in the global business environment," Samsung said in a statement. It didn't identify particular issues that could affect its operations.

The United States and China reached an initial deal late last year to resolve a long-running trade row that had disrupted global business, though some issues remain unresolved. Samsung rival Apple earlier this week used a wider-than-normal prediction range for a revenue forecast citing uncertainty created by the coronavirus outbreak in China which economists fear could hurt the global economy.

For first-quarter 2020, Samsung said it expected earnings to fall reflecting low seasonal demand.

Fourth-quarter operating profit more than halved to 3.45 trillion won in Samsung's mainstay chip division, while mobile division profit improved nearly 67 per cent to 2.52 trillion won.

Samsung said the pace of 5G smartphone expansion and its effects should be monitored closely, but the company sees demand picking up around mass-market models as major manufacturers expand their 5G lineups.

Shares fell 1.4 per cent by 0125 GMT, trailing the wider market's 0.6 per cent drop. Samsung shares rallied 44 per cent last year, as expectations of an easing of US-China trade tensions fuelled hope of a rebound in the chip industry.