Samsung Electronics(mobiles china), the world’s biggest smartphone and memory chip maker, reported a slump in fourth-quarter net profits on Thursday, blaming a drop in demand for its key products.
Net profits in the October-December period were KRW 8.46 trillion ($7.6 billion or roughly Rs. 54,000 crores), it said, down 31 percent year-on-year.
The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world’s 11th-largest economy, and it is crucial to South Korea’s economic health.
It has enjoyed record profits in recent years with mobiles china despite a series of setbacks, including a humiliating recall and the jailing of its de facto chief. But now the picture is changing, with chip prices falling as global supply increases and demand weakens.
It also has to contend with increasingly tough competition in the smartphone market from Chinese rivals like Huawei – which surpassed Apple to take second place last year — offering quality devices at lower prices.
“Unfavourable business and macroeconomic factors led to slower performance in the final quarter,” Samsung Electronics said in a statement, when “earnings were affected by a drop in demand for memory chips used in data centres and smartphones.”
It expected demand for chips to stay weak in the January-March period, “due to seasonality and macroeconomic uncertainties”.
Uncertainties over US-China trade tensions and China’s sluggish economy bode ill for global electronics makers in 2019, pressuring demand for memory chips, smartphones and display panels, analysts say. But some investors are hoping for a recovery for Samsung in the second half, fueled by chip sales to data centres, the rollout of 5G wireless technology and the launch of new gadgets including its long-promised, high-end foldable smartphone.
“If Samsung’s foldable smartphone becomes a hit, it will be a good factor for Samsung’s shares,” Park Jung-hoon, a fund manager at HDC Asset Management which holds Samsung Electronics stock, told Reuters.