Samsung profit hit by fall in demand for its chips

Increasing competition from Chinese smartphone makers and a dip in demand for its processing chips have led consumer tech giant Samsung to miss analysts forecast of its profits and sales in the last quarter of 2018.

Operating income fell to 10.8 trillion won (Dh35.25bn) in the period, according to preliminary results released yesterday, falling short of the 13.8tn won average of analysts’ projections compiled by Bloomberg.

“The memory pricing is going to get worse before it is going to get any better for Samsung and for the whole industry,” Neil Campling, co-head Global Thematic Group at Mirabaud Securities, told The National.

“There have been supply constraints versus demand during the past few years, with supply exceeding demand in the fourth quarter of 2018. Samsung has started taking initiatives to minimise the negative impact of memory business on future revenues.”

“Samsung has begun shifting some manufacturing lines into alternative areas.”

Industry experts say the tumbling chip market could also have far-reaching impact on other technology companies.

“Plummeting demand in server memory could suggest that even companies like Facebook and Google are investing less in servers,” said Abbas Ali, managing editor of TechRadar Middle East. “That could mean a slower year ahead for big tech giants such as Amazon Web Services and Microsoft cloud.”

Samsung’s sales for the fourth quarter, ended December 31, fell to 59tn won, compared with the 63.6tn won average projection compiled by Bloomberg.