Samsung's chip sales slows, dimming outlook

Samsung Electronics warned of weaker earnings in 2019 as it posted a 29 per cent drop in fourth-quarter operating profit on Thursday, hit by a slowdown in demand for memory chips.
Samsung Electronics' operating profit was 10.8 trillion won (S$13.06 billion) in the fourth quarter, in line with its estimates earlier this month. Revenue fell 10 per cent to 59.3 trillion won.
Samsung Electronics' operating profit was 10.8 trillion won (S$13.06 billion) in the fourth quarter, in line with its estimates earlier this month. Revenue fell 10 per cent to 59.3 trillion won.PHOTO: AGENCE FRANCE-PRESSE

SEOUL • South Korea's Samsung Electronics warned of weaker earnings this year as it posted a 29 per cent drop in fourth-quarter operating profit yesterday, hit by a slowdown in demand for memory chips.

The global market leader in computer chips and smartphones said in a statement it expected "overall annual earnings to decline" this year, although sales of memory products and Oled panels would begin to revive in the second half.

Operating profit was 10.8 trillion won (S$13.06 billion) in the fourth quarter, in line with its estimates earlier this month. Revenue fell 10 per cent to 59.3 trillion won.

The firm's chips power the handsets of most major smartphone makers, including Apple and China's market leader Huawei Technologies. Its memory and processor chips account for about 72 per cent of overall profit. But with China's economy growing at its slowest rate in nearly three decades, no end in sight to a United States-China trade war, smartphone sales weakening and US data centres overstocked with chips, it has been tough for global memory makers.

Samsung said memory demand was expected to remain weak in the first quarter due to "macroeconomic uncertainties" and inventory adjustments by major customers. Fourth-quarter operating profit for its chip division fell to 7.8 trillion won from 10.9 trillion won a year ago. Its mobile division logged 1.5 trillion won in quarterly operating profit, down from 2.4 trillion won a year ago.

Last year, Samsung shares lost 24 per cent amid a global tech sell-off prompted by fears over the impact on supply chains of the US-China trade conflict. "China's spending on IT products has dramatically fallen and we don't know when the US-China trade war is going to be over. All of that is affecting Samsung," said eBest Investment and Securities analyst Eo Kyu-jin.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 01, 2019, with the headline 'Samsung's chip sales slows, dimming outlook'. Print Edition | Subscribe