Economy

Samsung Electronics warns of near-30 percent profit slump

Samsung Electronics warns of near-30 percent profit slump

The corporation blamed the decline mainly on poor demand in its memory chip business, as well as heightened competition in the smartphone market.

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.

"We expect earnings to remain subdued in the first quarter of 2019 due to hard conditions for the memory business but strengthen in the second half".

The world's second-biggest television set maker behind compatriot Samsung Electronics Co Ltd estimated profit of 75.3 billion won (US$67.03 million) for October-December a year ago.

Many believe that chip sales have "passed their peak days" and as such Samsung are going to have to find new revenue streams or make something very compelling if they are to claw back some of these profits. Both LG and Samsung will disclose detailed earnings later this month.

Slowing demand, including from China, is weighing on the wider sector.

"Under weak seasonality, memory earnings fell significantly Q-Q [quarter over quarter] due to weaker-than-expected demand amid inventory adjustments at data-center customers, resulting in a decline in shipments and a greater-than-expected decrease in [average sales price]", Samsung said in a statement accompanying its guidance.

More news: NHS 10-year plan launched in bid to save 500000 lives

In a rare move for Apple, the company walked back its sales expectations for the last quarter of 2018, citing flagging sales in China.

The US/China trade war has also caused problems.

Moving on to the reasons why, it seems the intensifying competition from Chinese rivals have affected the brand more than initially expected in the smartphone market.

"Samsung is losing ground to Huawei, Xiaomi and other Chinese rivals in the huge China and India markets", Neil Mawston, executive director at market researcher Strategy Analytics, said in a report.

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 Co.

Samsung is also set to introduce the world's first bendable smartphone in the first half.

But he was released from jail in February past year after several of his convictions were quashed on appeal.