Samsung Warns of Profit Decline Due to Lower Demand for Memory

The logo of Samsung Electronics is seen at its office building in Seoul South Korea South Korea

Tech giant Samsung Electronics has flagged its first quarterly profit drop in two years, painting a grim outlook amid growing competition from Chinese smartphone makers and declining chip prices.

But the final quarter saw the smartphone maker miss analysts' expectations and brought its first quarterly decline in profits in two years.

Samsung, in a regulatory filing, estimated profit at 10.8 trillion won (S$13.1 billion) for October-December last year, down 29 per cent from the same period a year earlier.

Amid the smartphone woes, overall operating profit at Samsung's chip business is expected to have slipped 3.7 percent from a year ago to 10.5 trillion won.

The announcement comes on the heels of Apple's earnings warning - its first since 2002 - in which CEO Tim Cook said in a letter to investors that the iPhone maker expects first-quarter revenue of about $84 billion, down from the previous guidance of between $89 billion and $93 billion.

On Tuesday, the South Korean tech giant said weaker-than-expected demand from some of its data centre customers adjusting inventories drove down chip prices and hurt earnings.

Samsung's weaker earnings adds to worries for investors already on edge after United States tech giant Apple last week took the rare move of lowering its quarterly sales forecast, citing poor iPhone sales in China.

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Apple's surprise cut to its sales forecast last week suggested a worsening outlook for orders for Samsung. The South Korean giant will announce more details later on this month alongside its full Q4 2018 report.

One of the pillars of the tech industry, Samsung makes its own products and supplies components to other tech juggernauts like Apple.

Its memory-chip shipments fell 10 percent on an average in the fourth quarter, according to brokerage Eugene Investment & Securities.

Shares in Samsung Electronics, the flagship subsidiary of the Samsung Group that dominates South Korea's economy, were down 0.4 percent in mid-morning trading.

Samsung also faces fierce competition from Apple and Chinese rivals.

As for the smartphone market, Samsung said it expects to boost its prospects with foldable and 5G handsets.

Samsung is also set to introduce the world's first bending smartphone in the first half. This subsequently caused a larger-than-expected dip in prices.

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