Samsung warns of sales and profit decline

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Samsung warns of sales and profit decline

Samsung's profits have dropped by nearly 30 per cent due to a global fall in demand for microchips, the company has warned.

Samsung once also had a 20 percent market share in China but has seen its sales tumble to less than one percent of the world's largest smartphone market in the third quarter, and last month announced the closure of its factory in Tianjin. The guidance, released Thursday ahead of full earnings later this month, didn't provide specific divisional results but did offer some clues as to how some divisions have performed, specifically its memory and mobile businesses.

Samsung had in October slashed its 2018 capex, calling an end to a two-year bonanza for memory chips as the global smartphone market slowed.

Samsung Electronics on Tuesday flagged its first quarterly profit drop in two years, painting a grim outlook amid mounting competition from Chinese smartphone makers and declining chip prices.

While Samsung still leads the world in smartphone sales, it's being squeezed by Chinese handset makers like Huawei Technologies Co. "Demand for IT products in China and other emerging markets is also poorer than expected".

Samsung has a less than 1 percent share of China's smartphone market, versus 9 percent for Apple.

In a regulatory filing, Samsung estimated sales worth 59 trillion won (about $52.5 billion) during Q3 2018.

These announcements come after Apple CEO Tim Cook sent a letter to investors last week cautioning them not to expect strong first quarter earnings since the company had sold fewer iPhone upgrades than expected, citing its Chinese market in particular, as well as "some developed markets".

The South Korean chipmaker said there's weak global demand for its products amid a global economic slowdown that's being driven, in part, by a almost year-long trade war between the USA and China.

That led to a drop in shipments and a "greater-than-expected" decrease in chip prices, it added. Prices for 128 gigabit MLC NAND flash memory chips fell about 3.4 percent.

Samsung doesn't expect the memory business to pick up much in the next quarter (analysts believe data center customers like Amazon, Microsoft, and Google have enough memory for the time being), but the company hopes for improvements in the second half of the year.

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

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