Samsung estimates 11% revenue decline in Oct-Dec

Samsung Electronics on Tuesday said it will report 11 percent drop in revenue at 59 trillion won during October-December 2018.
Samsung tech team workersThe company issued a background statement along with its fourth-quarter earnings guidance to “ease confusion” among investors as its estimate was far below market forecasts.

“We expect earnings to remain subdued in the first quarter of 2019 due to difficult conditions for the memory business,” it said.

It released a similar note for investors in late 2014, when it also missed market estimates as mobile profit fell.

On Tuesday, the South Korean tech giant said weaker-than-expected demand from some of its data center customers adjusting inventories drove down chip prices and hurt earnings. It did not identify the customers.

Samsung Electronics is expected to report a 29 percent drop in quarterly operating profit, its first decline in two years, Reuters reported.

Samsung estimated profit at 10.8 trillion won or $9.67 billion for October-December last year, down 29 percent from the same period a year earlier.

Apple has lowered its sales forecast to $84 billion in revenue for its fiscal first quarter ended December 29, below its earlier forecast of $89-$93 billion. Apple has reduced its revenue estimates due to less demand for iPhones in China.

Huawei, the second largest smartphone maker in the world, earlier said it sold 200 million smartphones in 2018.

“Poor chip sales to Chinese major cloud companies raised Samsung’s inventory level which led to chip price declines,” said analyst Kim Young-woo at SK Securities.

“Second- and third-tier Chinese smartphone makers saw drastic drops in their sales, which also took a toll on chip demand,” Kim said.

Samsung’s memory and processor chips, which account for over three-quarters of its earnings and about 38 percent of sales, power smartphones including those from China’s biggest handset maker Huawei Technologies.

Samsung will disclose detailed earnings later in January.

Prices for DRAM chips, which provide devices with temporary workspaces and allow them to multi-task, declined 10 percent in the fourth quarter, according to industry tracker DRAMeXchange.

Prices of NAND flash memory chips, which hold data permanently, slipped 15 percent.

DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019.

Samsung said the memory market is likely to improve from the second half of the year due to the adoption of new central processing units as well as smartphone launches.

It said a stagnant and fiercely competitive smartphone market pressured its income and that the firm would continue to innovate its product line such as foldable and 5G models.