Samsung posts Q4 guidance, profit goes down 38%

A man tries out a Samsung Electronics' Galaxy Note 9 at its store in Seoul South Korea Jan. 7 2019. Kim Hong-Ji Reuters

Tech giant Samsung Electronics has flagged its first quarterly profit drop in two years, painting a grim outlook amid growing competition from Chinese smartphone makers and declining chip prices.

In Samsung's case, the tech giant estimated its operating profit for the three months ended December was approximately 10.8 trillion Korean won (approximately $9.67 billion), which is roughly 29 percent down year-over-year and about 18 percent less than the 13.2 trillion won predicted by analysts.

Earnings calls are not something we normally keep a close eye on here at Ausdroid but when you see the biggest brand in Android drop 29 percent compared to the same time past year you sit up and take notice.

On Tuesday, the South Korean tech giant said weaker-than-expected demand from some of its data centre customers adjusting inventories drove down chip prices and hurt earnings.

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.

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Samsung is blaming the decline in its memory chip business.

Samsung said a "stagnant and fiercely competitive" mobile market had weighed on earnings as marketing spend rose but smartphone sales volumes remained flat.

Its memory-chip shipments fell 10 percent on an average in the fourth quarter, according to brokerage Eugene Investment & Securities.

"We expect earnings to remain subdued in the first quarter of 2019 due to hard conditions for the memory business", the South Korean tech giant said in a statement.

DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter. This is the first time they have commented on an earnings report since 2014.

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Samsung also faces fierce competition from Apple and Chinese rivals.

"Recovering demand in the first quarter can not be expected, because it is a seasonally low period and customers also know prices are coming off, so there's no rush to buy", said Sanjeev Rana, a Korea technology analyst at CLSA."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".

"The macroeconomics issue is dominant", said Lee Jae-yun, an analyst at Yuanta Securities in Taiwan.

"You see, Apple's iPhones are already losing sales in China". The wider market was up 0.1 percent rise.

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