UPDATED 21:48 EDT / JANUARY 30 2019


Samsung reports lower profit from declining demand for memory chips

Following in the footsteps of rival Apple Inc., Samsung Electronics Co. Ltd. reported declining sales and a drop in profit in its fourth-quarter earnings today.

Coming off a record profit in the third quarter of 2018, Samsung reported an operating profit 10.8 trillion won ($9.7 billion) in the quarter, down 29 percent from the previous quarter.

Samsung’s profit, its lowest since the Galaxy Note 7 debacle in 2016, came from declining demand for its memory chips. Overall revenue for the South Korean giant fell 10 percent, to 59.3 trillion won.

Best known for its smartphones, Samsung is also a primary provider of memory chips to multiple other phone makers. The memory chip unit had been the main driver of Samsung’s roaring success in the last couple of years. Samsung is said to sell more memory chips than any other company in the world, having surpassed Intel Corp. to become the largest semiconductor maker in terms of revenue earlier in 2018.

The decline in demand for Samsung’s memory chips is reflected in slowing demand for smartphones, though Samsung itself remains upbeat. “For the whole of 2019, demand for smartphones is expected to maintain the same level seen in 2018 while market is projected to rise due to a trend toward adopting high-end features such as large screens, higher memory capacity, and multi-cameras,” Samsung said in a statement. “The environment overall will remain challenging due to the sluggish growth of the global smartphone market and material cost burden.”

While it’s the world’s most popular smartphone maker, Samsung chips also power all of its rivals, including Apple and Huawei Technologies Co. Ltd. to name a few. Slowing demand for smartphones results in slowing demand for Samsung memory chips.

Looking forward, Samsung said it expects demand in the Memory Business to remain weak in the first quarter thanks to seasonality and macroeconomic uncertainties as well as inventory adjustments by major customers. It also predicted that its OLED screen business profitability is likely to decline “weighed on by slow sales of premium smartphones and rising competition with LTPS LCD products.”

Given that Samsung predicted the decline in profit earlier this month in preliminary results, its stock price only declined slightly on the Korea Exchange after the announcement was made.

Photo: DennisM2/Flickr

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