Sam­sung Elec­tron­ics posts 34% de­cline in Q4 op­er­at­ing profit

Muscat Daily - - BUSINESS -

Seoul, South Korea - Sam­sung Elec­tron­ics’ op­er­at­ing prof­its fell by more than a third in the fourth quar­ter, the world’s big­gest man­u­fac­turer of smart­phones and mem­ory chips es­ti­mated on Wednesday.

Sam­sung was hit by a se­ries of dif­fi­cul­ties in 2019, with chip stock­piles bloat­ing and prices fall­ing, in con­trast to the boom­ing mar­ket of pre­vi­ous years.

The premium smart­phone mar­ket has also grown fiercely com­pet­i­tive with buy­ers wait­ing longer be­fore up­grad­ing to new mod­els.

But the fig­ures beat ex­pec­ta­tions, an­a­lysts said, with chip de­mand start­ing to im­prove and strong smart­phone sales.

The fore­cast rep­re­sented a rel­a­tive im­prove­ment - in each of the first three quarters of 2019 net prof­its fell by more than half year-on-year.

Sam­sung Elec­tron­ics is cru­cial to South Korea’s eco­nomic health. It is the flag­ship sub­sidiary of the giant Sam­sung Group, by far the largest of the fam­ily-con­trolled con­glom­er­ates, known as chae­bols, that dom­i­nate busi­ness in the world’s 11th-largest econ­omy.

In an earn­ings guid­ance state­ment, Sam­sung Elec­tron­ics pro­jected op­er­at­ing prof­its in the Oc­to­ber to De­cem­ber pe­riod at 7.1tn won (US$6.1bn), down 34.2 per cent year-on-year.

Sales were fore­cast to be flat at 59tn won, it added.

For full-year 2019, it pre­dicted op­er­at­ing prof­its of 27.7tn won, down 52.9 per cent, on sales down 5.8 per cent to 229.5tn won.

The com­pany has been strained by a pro­tracted trade dis­pute be­tween China and the US, and been caught up in a diplo­matic row be­tween Seoul and Tokyo over his­tor­i­cal dis­putes, with Ja­pan im­pos­ing tough re­stric­tions on ex­ports cru­cial to South Korean tech giants in July.

In an­other shadow hang­ing over the firm, its vice chair­man and de-facto leader Lee Jae-yong is on trial for the sec­ond time over the sprawl­ing cor­rup­tion scan­dal that led to the im­peach­ment of South Korea’s for­mer pres­i­dent Park Geun-hye.

A guilty ver­dict and long prison sen­tence would de­prive the firm of its top de­ci­sion maker.

Its board chair­man Lee Sanghoon was also jailed last month for sab­o­tag­ing union ac­tiv­i­ties, prompt­ing a rare apol­ogy from the firm.

“Sales in mem­ory chips were strong­est along with good numbers in its IT and Mo­bile divi­sion,” said Lee Joon-min of Hana Fi­nan­cial In­vest­ment.

An­a­lysts ex­pect Sam­sung to per­form bet­ter this year on the back of a re­cov­ery in chip de­mand and lim­ited sup­ply, along with new 5G smart­phone mod­els and other in­no­va­tions.

Re­duced chip pro­duc­tion at one of Ja­panese ri­val Kioxia’s plants has seen av­er­age NAND flash sell­ing prices ‘start to re­bound’, Avril Wu, an an­a­lyst at the Taipei-based mar­ket tracker TrendForce told AFP.

“As for DRAM, we ex­pect prices to in­crease each quar­ter in 2020,” she said, adding: “The re­cov­ery of the DRAM and NAND mar­ket is mostly driven by the con­stric­tion of sup­ply, but an in­crease in de­mand also con­trib­utes to this as well.”

Sam­sung is also pin­ning its hopes on in­creas­ing avail­abil­ity of 5G tele­com ser­vices driv­ing sales of its hand­sets - it is a world leader in the tech­nol­ogy.

It said last week it had shipped more than 6.7mn Gal­axy 5G smart­phone de­vices glob­ally last year, claim­ing it had more than half the world’s 5G smart­phone mar­ket as of Novem­ber.


Sam­sung Elec­tron­ics’ logo is dis­played out­side the Sam­sung build­ing in Seoul, South Korea

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