Samsung predicts profit decline as chip market swoons:The Asahi Shimbun

Andrew Cummings
October 8, 2019

According to its preliminary earnings report released on Tuesday, Samsung Electronics recorded operating profits of some six.four billion USA dollars in the July-to-September period, up 17 percent on-quarter.

South Korea's biggest company is suffering from the slowdown in its core industry, though analysts say the demand will likely revive as next-generation networks are rolled out.

The operating profit was estimated at 7.7 trillion won ($6.4 billion) in the July-September period, according to its earnings guidance.

Sales for the third quarter were 62-trillion won, beating the average projection compiled by Bloomberg of 61.14-trillion won. The company will release more detailed quarterly earnings later this month.

The flagship subsidiary of the sprawling Samsung Group has enjoyed record profits in recent years despite a series of setbacks, but is now struggling, with chip prices falling as global supply increases while demand weakens.

According to financial analysts, the inventory levels of DRAM at Samsung and SK hynix will be normalized by the second quarter of next year.

Samsung, the world's largest smartphone maker, is powering ahead with the launch of 5G phones and $2,000 foldable handsets as it heats up competition with rivals US Apple and China's Huawei following a battery explosion scandal in 2017 that hurt sales. Also, by increasing the number of stacked layers from eight to 12, Samsung will soon be able to mass produce 24-gigabyte high bandwidth memory, which provides three times the capacity of 8GB high bandwidth memory on the market today. However, this is still slightly better than the expectation of analysts.

It comes as no surprise as Samsung warned earlier this year that profits would fall by 56 per cent in the second quarter.

Samsung also took advantage of the USA trade ban against Huawei, "replacing a strong competitor in crisis" with its mid-to-low tier Galaxy A handsets, said Sujeong Lim, an analyst at Counterpoint Research. Still, that is a profit decline of more than 50% for the Suwon, South Korea-based company.

Concerns over the impact on the production of chips and displays have eased among some market watchers as Japan approved shipments of key materials to Samsung.

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