Samsung feels Apple’s pain as technology slowdown hits sales

Daniel Fowler
January 9, 2019

Many models are cheaper than those made by Apple and Samsung.

Revenue is expected to have slipped 5 percent, hurt by lower memory-chip shipments.

But analyst Kim Sun-woo of Meritz Securities said worsening supply and demand conditions for semiconductors and the structural challenges facing Samsung's smartphone business will drag down the firm's profits throughout 2019.

Samsung once also had a 20 per cent market share in China but has seen its sales tumble to less than one per cent of the world's largest smartphone market in the third quarter, and last month announced the closure of its factory in Tianjin.

Semiconductors now account for more than three-quarters of Samsung's total profit, compared with the first quarter of 2013 when its phone business represented nearly three-quarters of profit.

"You see, Apple's iPhones are already losing sales in China. Demand for IT products in China and other emerging markets is also poorer than expected".

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Shares in Samsung opened down 1.9 percent but have since turned positive. But its 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 top player Huawei.

Meanwhile, shortly after Samsung's announcement, fellow South Korean company LG noted that its fourth quarter operating profit likely fell 80 percent from the same period a year earlier. Apple receives memory chips and smartphone screens from Samsung and is the South Korean manufacturer's biggest customer, according to data compiled by Bloomberg.

"We expect earnings to remain subdued in the first quarter of 2019 due to hard conditions for the memory business", Samsung said, in a statement. The World Bank has estimated the weakest GDP expansion for the country in almost three decades this year.

It marks the first quarterly profit drop in two years as strong demand for chips had boosted earnings at the firm.

Among the most China-exposed industries - jeopardised by US President Donald Trump's trade war along with an impending slowdown - tech stocks that once seemed unassailable have been hit hard over the past few months, with the Nasdaq falling 17 per cent since its late August peak.

Samsung's profit is expected to decline through 2019 as the weakness persists, Refinitiv data showed.

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