Business

Tech industry uncertainty as Samsung slashes profit guidance

Share
Jung Yeon-je  AFP  Getty Images

Samsung Electronics Co's quarterly profit and revenue missed estimates on sputtering demand for memory chips during the last three months of past year, the same period when Apple Inc saw anemic sales in China.

Preliminary figure for operating profit was 10.8 trillion won (9.6 billion USA dollars) in the October-December quarter, down 28.7 percent from a year earlier.

Added to that, the smartphone market is now stagnating and competition is fierce. The corporation blamed the decline mainly on poor demand in its memory chip business, as well as heightened competition in the smartphone market.

Samsung's revenue also likely dipped 11% during the quarter to $52.5 billion, according to Bloomberg. 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. Apple ranked fifth, taking up only 9 percent of the market share in China. 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 nearly two decades. It far missed market expectations of about 398 billion won (353 million USA dollars). Samsung didn't provide net income, which it will do later this month when it releases final results. Samsung also acknowledged that its own smartphone business is struggling in a "stagnant and fiercely competitive market", CNBC wrote.

Samsung - the world's top maker of smartphones and memory chips - has enjoyed record profits in recent years despite a series of setbacks, including a humiliating recall and the jailing of its de facto chief.

A week ago Apple (NASDAQ:AAPL) announced that they had lowered their guidance for Q1 earnings citing weaker demand for smartphones than anticipated among other factors that contributed to lower than expected profits. Two of its largest competitors, Samsung and LG, have reported lower-than-expected sales for the same period ending in December 2018.

Samsung is now the world's leading manufacturer of NAND flash memory chips and DRAM chips, which provide devices with temporary workspaces and allow them to multitask.

Analysts have said that features and functionality in smartphones have become so similar that there aren't any distinguishing features between different companies' products.

Share