Samsung flags profit slump as Chinese rivals rise

Jung Yeon-je  AFP  Getty Images

Jung Yeon-je AFP Getty Images

But the final quarter saw the smartphone maker miss analysts' expectations and brought its first quarterly decline in profits in two years.

The South Korean company reported preliminary operating income dropped to 10.8 trillion won (US$9.65 billion) for the period that ended in December, missing the average analyst estimate compiled by Bloomberg by 22 per cent.

In a regulatory filing, Samsung estimated sales worth 59 trillion won (about $52.5 billion) during Q3 2018.

Samsung doesn't expect the memory business to pick up much in the next quarter (analysts believe data center customers like Amazon, Microsoft, and Google have enough memory for the time being), but the company hopes for improvements in the second half of the year.

The US/China trade war has also caused problems.

Demand for DRAM memory chips "will hit a low in the fourth quarter of 2019", he told AFP news agency.

One of the pillars of the tech industry, Samsung makes its own products and supplies components to other tech juggernauts like Apple.

The warning, which comes ahead of Samsung's latest financial results later this month, will spark new fears of a slowdown in the tech market which has already seen precipitous drops in many companies' share prices.

Shares in Samsung Electronics, the flagship subsidiary of the Samsung Group that dominates South Korea's economy, were down 0.4 percent in mid-morning trading.

But it faces mounting competition from Chinese rivals such as Huawei producing quality devices at lower prices.

Weaker earnings at the world's biggest maker of smartphones and semiconductors adds to worries for investors already on edge after Apple Inc last week lowered its quarterly sales forecast, in a rare move, citing poor iPhone sales in China. They have also begun to buy smartphones from Chinese manufacturers such as Huawei and Xiaomi. The world's largest smartphone maker by shipment has been increasingly dependent on chips for profit growth, riding on a spike in global data traffic while yielding to stiffer competition for phones.

Samsung's reputation suffered a major blow after a damaging worldwide recall of its Galaxy Note 7 devices over exploding batteries in 2016, which cost the firm billions of dollars and shattered its global brand image.

But he was released from jail in February a year ago after several of his convictions were quashed on appeal.

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