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Samsung expects sharp drop in fourth-quarter profit

The decline is blamed on falling demand for chips, smartphones.

Jung Yeon-je / AFP/Getty Images

After reporting record profit in the third quarter, Samsung expects a dramatic decline in its fourth-quarter profit due to lackluster demand for chips and intensifying competition in the smartphone market.

The South Korean electronics giant said Monday it expects to record an operating profit for the three-month period ended Dec. 31 of around 10.8 trillion won ($9.6 billion), a 30 percent decrease from the year-ago period.

The company is also expected to record revenue of 59 trillion won ($52.8 billion), a decline of nearly 15 percent from a year earlier. The earnings guidance, released Tuesday ahead of full earnings later this month, didn't provide specific divisional results but did offer some clues as to how some divisions have performed, specifically its memory and mobile businesses.

"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.

"Amid a stagnant and fiercely competitive market, mobile profits declined due to increased marketing expenses under strong seasonality and a flat smartphone sales volume," Samsung said.

Looking forward, Samsung said it expects earnings to "remain subdued in the first quarter of 2019 due to difficult conditions for the memory business." The company expects market conditions to improve in the second half of the year.

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

Samsung is best known as a phone and TV maker, but it also sells more memory chips than any other company on the planet. In 2017, Samsung became the world's biggest semiconductor maker in terms of revenue, beating out the long-term leader Intel.

Samsung's guidance comes less than a week after Apple warned investors that its fiscal first-quarter (fourth calendar quarter) revenue would be weaker than previously expected. Its announcement that it now sees sales of $84 billion, well below the range of $89 billion to $94 billion that it forecast in November, sent company shares down nearly 10 percent.

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