Samsung slashes 2018 capex, calls end to two-year chip boom

SEOUL: Samsung Electronics Co Ltd slashed 2018 capex by more than a quarter yesterday and warned of lower profit until early next year, calling an end to a twoyear boom in memory chips that fuelled record third-quarter profit.

The downbeat forecast by the world’s biggest maker of memory chips and smartphones adds to investor jitters over waning global demand for mobile and other electronics devices that roiled world stock markets this month.

The South Korean technology giant said it expected a quarter-onquarter earnings decline in the fourth quarter due to weak demand for memory chips and higher smartphone marketing spend during the year-end holiday season.

“Looking further ahead to 2019, earnings are forecast to be weak for the first quarter due to seasonality, but then strengthen as business conditions, particularly in the memory market, improve,” Samsung said in a statement.

Analysts said the capex cut should ease concerns over further supply growth and price declines, as prices of some memory chips have already fallen to over twoyear lows and rivals are set to start new production lines next year.

Samsung, one of the industry’s biggest buyers of chipmanufacturing tools, said its capital spending this year would drop by 27% to 31.8 trillion won (RM117 billion) from a record 43.4 trillion won last year.

“NAND (flash memory) chip prices will further decline through the first half of next year ... (as) Toshiba’s new production line will start and Hynix starts mass production of one of its NAND lines,” said Song Myung-sup, an analyst at HI Investment & Securities.

“Oversupply is expected to continue.”

Samsung, however, sought to assuage investor concerns of a steep downturn in the chip market, citing solid demand from servers as cloud-based data services grow fast. – Reuters