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Samsung warns of tough 2016 as competition mushrooms

South Korean tech giant Samsung Electronics said it expects a difficult business environment in 2016 due to weak global economic conditions and heightened competition in key businesses including memory chips and smartphones.

business Updated: Jan 05, 2016 01:51 IST
South Korean tech giant Samsung Electronics said it expects a difficult business environment in 2016 due to weak global economic conditions and heightened competition in key businesses including memory chips and smartphones.
South Korean tech giant Samsung Electronics said it expects a difficult business environment in 2016 due to weak global economic conditions and heightened competition in key businesses including memory chips and smartphones. (File Photo)

South Korean tech giant Samsung Electronics said it expects a difficult business environment in 2016 due to weak global economic conditions and heightened competition in key businesses including memory chips and smartphones.

In a statement on Monday, Samsung said chief executive Kwon Oh-hyun told employees in a New Year’s address that low global growth will persist this year, with greater uncertainty stemming from issues such as financial risks for emerging countries.

The comments, which didn’t disclose specific forecasts, come amid growing concerns that October-December results for the world’s biggest maker of smartphones and chips may be weaker than previously expected. Samsung Electronics’ shares on the benchmark Korean index -- Kospi -- closed down 4.37%, while the broader market was off 2.17%.

“Negative impact from weak demand and falling sales prices for semiconductor and liquid crystal display industries was likely bigger than initially anticipated,” brokerage Korea Investment said in a report issued separately on Monday.

Korea Investment lowered its estimate for Samsung’s fourth-quarter operating profit to 6.4 trillion won ($5.41 billion) from 6.8 trillion won previously. The mean estimate of 36 analysts’ forecasts compiled from a survey by Thomson Reuters is for operating profit of 6.8 trillion won, 8.1% lower than the 7.4 trillion won booked in the third quarter.

Samsung CEO Kwon also warned of greater competition in the firm’s main businesses, Samsung said in its statement, without offering detailed financial forecasts.

The firm is expected to issue official earnings guidance for the October-December period on Friday. It already said in late October that operating profit for the quarter will be lower than July-September earnings, citing seasonally weaker demand for its component businesses.