Samsung 4Q profit suffers from declining chip sales

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Samsung, the world's biggest producer of semiconductors and smartphones, expects to post its first quarterly profit drop in two years as slowing sales in China weigh on earnings prospects, Reuters reports.

Preliminary figure for operating profit was 75.3 billion won (67 million USA dollars) in the October-December quarter, down 79.5 percent from a year earlier.

Samsung is dealing with broader industry trends like many people already having a smartphone and broader economic uncertainty, but it also has to get a handle on changing trends within tech, said Gartner analyst Werner Goertz.

In a statement on Tuesday, the firm cited lacklustre demand and rising competition for its darkening outlook.

The company added that it expected earnings to remain subdued in the first quarter of 2019 but to strengthen in the second half of the year.

It estimates sales at 59 trillion won or about 52 billion dollars.

Samsung will disclose detailed earnings later in January.

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"Depressed demand in China will further drive down Samsung's chip sales there".

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.

"While the US-China trade war hangs over them, these customers just won't accept current prices, and Samsung faces pressure to cut chip prices".

Samsung has a less than 1 percent share of China's smartphone market, versus 9 percent for Apple.

Samsung - the world's top maker of smartphones and memory chips - has enjoyed record profits in recent years despite a series of setbacks, including a humiliating recall and the jailing of its de facto chief. Samsung did not provide net income, which it is to do later this month when it releases final results. The decline led to a decline in prices, and sales, leading to the decline in profits for Samsung. Weak demand in the memory division caused the profits to decrease sharply, Samsung said.

Samsung is now the world's leading manufacturer of NAND flash memory chips and DRAM chips, which provide devices with temporary workspaces and allow them to multitask. "In the second quarter Samsung launches the Galaxy S10 and a lot of other Android makers announce new model launches that might help smartphone demand and enhance the demand for DRAM".

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