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Home / Tech / Samsung’s Q4 2019 profit slumps to $6.13 billion due to weaker chip demand

Samsung’s Q4 2019 profit slumps to $6.13 billion due to weaker chip demand

Samsung said fourth-quarter operating profit slumped to 7.16 trillion won ($6.13 billion) on weaker chip demand, down 34% from the same period a year earlier.

tech Updated: Jan 30, 2020 11:56 IST
Reuters
Reuters
Seoul
Samsung shares quarterly report for Q4 2020.
Samsung shares quarterly report for Q4 2020.(AP)

Samsung Electronics Co is counting on a gradual recovery in memory chip demand from data centres and 5G smartphone makers to help it bounce back in 2020 after sliding to its worst operating profit in four years.

But in a guarded outlook, the world’s biggest memory chip and smartphone maker said on Thursday it couldn’t rule out the possibility that demand growth may be curbed amid lingering tensions on US-China trade and looming fears of the economic impact of the new coronavirus outbreak in China and beyond.

Samsung, which counts smartphone rivals Apple Inc and Huawei Technologies Co as customers for its chips and displays, said fourth-quarter operating profit slumped to 7.16 trillion won ($6.13 billion) on weaker chip demand, down 34% from the same period a year earlier.

That was in line with its own estimate, though net profit for the quarter skidded 38% to 5.2 trillion won, meaning Samsung missed analysts’ estimate of 5.6 trillion won.

On an annual basis, the South Korean conglomerate posted operating profit of 27.8 trillion won, its lowest since 2015 and marking the biggest percentage fall in a decade.

Samsung’s chip peers like Intel Corp and TSMC earlier offered positive outlooks, fuelling hopes of a rebound in chip prices after a slide that started in late 2018.

But in its outlook earlier this week Apple flagged uncertainty created by the coronavirus outbreak in China which economists fear could hurt the global economy.

Samsung said it expected January-March earnings to fall from the preceding quarter, reflecting low seasonal demand for chips and displays.

The company’s shares fell 3.2% by 0430 GMT, trailing the wider market’s 1.7% drop, with observers suggest the guarded guidance had disappointed investors.

“Samsung offered a conservative outlook for the memory market, and there is a disconnect between market views and the company views when it comes to strength of the recovery,” said Park Sung-soon, an analyst at Cape Investment & Securities.

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Speaking during a conference call, a Samsung chip executive, flagged uncertainties in chip demand. “The macroeconomic and geopolitical concerns are showing signs of easing recently, but we can’t rule out the possibility that the situation would deteriorate.” He didn’t identify specific issues that could affect business.

Fourth-quarter operating profit more than halved to 3.45 trillion won in Samsung’s mainstay chip division, while its mobile division profit surged by two-thirds to 2.52 trillion won, thanks to strong sales of flagship models and a revamp of its mid- and lower-end A series line-up.

Samsung said the actual pace of 5G network expansion and its effects on memory demand remains to be seen, but the company sees demand picking up around mass-market models as major manufacturers expand their 5G lineups.

It said it aims will expand its presence in the 5G network equipment market in the United States, while continuing to look at the possibility of entering the European market.

This week Britain granted Huawei a limited role in developing the country’s 5G mobile network, frustrating a global attempt by the United States to exclude the Chinese telecoms giant from the West’s next-generation communications.

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