Samsung Warns of Sales and Profit Decline, Cites Weak Chip Demand


Final results and the Details will be publish Samsung until the end of January. Apple is Samsung's biggest customer for memory chips and smartphone screens.

"The global data center servers temporarily suspended their DRAM purchases, and demand for new IT products in China and emerging markets fell below the market expectation", Lee Jae-yoon, an analyst at Yuanta Securities, said. Two of its largest competitors, Samsung and LG, have reported lower-than-expected sales for the same period ending in December 2018.

In a regulatory filing, Samsung estimated sales worth 59 trillion won (about $52.5 billion) during Q3 2018. Below is the recent history of operating profit from Samsung since 2016, it should be noted Q4 is typically the most profitable month for them, which will not be the case this year.

It missed market expectations of about 13.4 trillion won (11.9 billion USA dollars), recording an earnings shock.

Samsung is blaming the decline in its memory chip business.

"We expect earnings to remain subdued in the first quarter of 2019 due to hard conditions for the memory business", it said.

But analyst Kim Sun-woo of Meritz Securities said worsening supply and demand for semiconductors and the structural challenges facing Samsung's smartphone business will hit profits throughout 2019.

DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019. It is the first quarter is minus since the late summer of 2016, as Samsung had to take to start selling because of the inherent fire risks the former top model Galaxy Note 7 from the market.

"Apple's iPhones have not been selling well in China. That's even worse for Samsung because that would drag its chip prices down", Roh said, referring to Apple as a Samsung chip client.

Samsung's news comes just a week after a similar grim forecast from Apple, which lowered its sales estimates for the first time in 15 years due to slowing iPhone sales in China, according to chief executive Tim Cook.

Samsung's shares fell as much as 2.1 percent before paring losses at midday in Seoul.

Shares in Samsung Electronics, the flagship subsidiary of the Samsung Group that dominates South Korea's economy, were down 1.68 per cent at the close.

Following a rare disappointing second quarter of 2018, Samsung returned to record profits in Q3 past year.