Weak chips mar­ket drives tech ma­jor’s quar­terly op­er­at­ing profit down 56 per cent

The National - News - - BUSINESS - Alkesh Sharma

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.

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