Samsung joins Apple to share global revenue pain

Samsung Electronics’ quarterly profit and revenue missed estimates on sputtering demand for memory chips during the last three months of 2018, the same period when Apple saw anemic sales in China.

The South Korean company’s operating income fell to 10.8 trillion won (€8.4bn) in the quarter that ended in December, according to preliminary results, falling short of the 13.8 tn-won average of analysts’ estimates.

Deteriorating relations between the US 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 revitalise its smartphone business. Compounding that challenge is weakness at Apple, a major customer of components; the iPhone maker stunned global markets last week when it cut its sales outlook for the first time in almost two decades.

“It’s a shock,” Song Myung-sup, an analyst at Hi Investment and Securities said of Samsung’s results.

The shares have already dropped 24% in 2018. Memory chips account for the biggest portion of Samsung’s profit. Apple receives memory chips and smartphone screens from Samsung and is the South Korean manufacturer’s biggest customer.

Samsung said it expects earnings to remain subdued in the first three months of the year due to difficult conditions for memory. Profitability will recover in the second half, the company predicted.

While Samsung still leads the world in smartphone sales, it’s being squeezed by Chinese handset makers like Huawei Technologies. The South Korean company is pinning its hopes on a foldable-screen phone that it plans to ship this year, along with a flagship Galaxy S10 model that is said to feature an in-display fingerprint sensor and a near-zero bezel.

“Recovering demand in the first quarter cannot be expected, because it is a seasonally low period and customers also know prices are coming off, so there’s no rush to buy,” said Sanjeev Rana, a Korea technology analyst at CLSA.

“In the second quarter Samsung launches the Galaxy S10 and a lot of other Android makers announce new model launches that might help smartphone demand and enhance the demand for DRAM.”

Meanwhile, South Korea’s LG Electronics said its fourth-quarter operating profit likely plummeted 80% from the same period a year earlier. Analysts said likely causes included profit margins for its high-end TVs being thinned by increasing competition, while the firm’s smartphone business continues to lose money.

Bloomberg

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