Samsung Earnings Slump less Severe than Feared

Fallende Preise für Speicher-ICs, das schleppende Smartphone-Geschäft und preisdruck bei Displays hat Samsung im ersten Quartal einen Gewinneinbruch gebracht.

Falling prices for memory ICs, the sluggish smartphone business and price pressure on displays have caused Samsung's profits to collapse in the first quarter.

As memory prices have risen, Samsung's operating profit has turned out better than expected.

In an outlook, Samsung expects operating profit in the fourth quarter of 2019 to fall 34 percent to $6.09 billion (7.1 trillion won) compared to the fourth quarter of 2018. Revenues in the fourth quarter were down 0.5 percent to 59 trillion won. Annual profit plummeted 53 percent to 27.7 trillion won, the sharpest profit decline in the last ten years.

Over the past year, Samsung suffered primarily from the oversupply in the memory chip market and the resulting drop in prices.

However, the fact that operating profit is now better than expected despite the decline indicates that memory prices are recovering. This is because users are likely to have reduced their inventories to a large extent, while demand from server manufacturers should rise again. An additional boost will come from 5G smartphones. The fact that trade relations between China and the US appear to be easing somewhat also contributes to the improvement in the business climate overall. In the smartphone segment, Samsung was able to increase its market share vis-à-vis Huawei in Europe and South America, which suffered from the American sanctions.  Samsung will announce the final figures for the fourth quarter of 2019 this month.