Weak chips market drives tech major’s quarterly operating profit down 56 per cent
Samsung Electronics reported a 56 per cent plunge in third-quarter operating profit owing to a weaker chip market.
Operating profit in the three months to September 30 fell to $6.6 billion (Dh24.2bn), the South Korean consumer tech giant reported.
“Memory chip prices continued its downward trend amid the industrywide weakness since the end of 2018,” Samsung said.
While the company recorded strong smartphone sales and increased demand for its mobile displays – which are used by leading smartphone manufacturers, such as Apple – overall growth was “weighed down by continued weakness in the memory chip market”.
This is the fourth consecutive quarter where Samsung’s operating profit fell year-onyear. The company’s quarterly revenue also dipped to $52.8bn from $55.8bn last year. Samsung’s mobile earnings in the third quarter improved on increased shipments of its latest flagship product the Galaxy Note 10 (rolled out in August), a better product mix and higher profitability in mass markets such as India and China, said Samsung.
In the third quarter the Galaxy Note 10 exceeded the sales performance of its predecessor the Note 9, recording double-digit growth in volume, the company said, without disclosing the exact number.
For the fourth quarter, Samsung expects a decrease in mobile business earnings as “marketing costs will rise and shipments will decline slightly, with flagship model sales weakening from their post-launch peaks”.
However, the company predicts “solid sales” of its budget-conscious A series smartphones. Samsung also expects a “slight recovery” in chip demand thanks to inventory building by customers in response to global macroeconomic uncertainties.
To enhance its competitiveness, the company plans to offer more fifth-generation mobile devices and foldable products.
It also teased a new foldable smartphone concept at its developer conference in San Jose that folds vertically like a traditional flip phone. “In 2020, consumer demand for 5G devices is expected to rise as 5G networks expand globally, while competition is likely to remain fierce,” it said.
Samsung boosted shipments of its smartphones in the third quarter by 8 per cent year-onyear and stayed on top with a 21.3 per cent market share.