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Sat, August 13, 2022 | 19:30
Tech
Falling chip price to drag down Samsung's profit
Posted : 2018-12-24 17:11
Updated : 2018-12-24 18:33
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By Baek Byung-yeul

Samsung Electronics is unlikely to post record-breaking earnings during the October-December period due to weakening memory chip prices and stagnating demand, market analysts said Monday.

The consensus of major brokerage firms shows Samsung is expected to log an operating profit of 13.97 trillion won ($12.3 billion) in the fourth quarter, down 7.6 percent year-on-year.

It is also a 20.5 percent decrease, compared to the previous quarter, in which the firm recorded an all-time high quarterly operating profit of 17.5 trillion won.

This would be the first time for the firm's operating profit to dip below the 14 trillion won mark since the first quarter last year when it posted 9.9 trillion won in operating profit.

Samsung is scheduled to post its fourth quarter earnings report in early January.

The weaker performance is attributed to the weakening price of DRAM and NAND chips as the super cycle of semiconductors that lasted more than two years has come to an end.

The growing uncertainty caused by the trade war between the U.S. and China is another factor, an industry expert said.

"The escalating trade tensions between the U.S. and China and a sluggish global economy have made companies reduce their stocks to decrease market uncertainty," said Hanwha Investment and Securities researcher Lee Soon-hak.

In terms of yearly performance Samsung is expected to post its all-time high yearly sales and operating profit of 248 trillion won and 62.6 trillion won in 2018, surpassing 2017's record of 239.5 trillion won in sales and 53.6 in operating profits.

However, experts said the company is likely to have a gloomier outlook in the semiconductor sector in 2019 as the overall price of memory chips on the market is forecast to see a sharper drop.

According to market researcher DRAMeXchange, the price of PC DRAM is forecast to decline by over 10 percent in the first quarter of 2019. "The continued supply increase, headwinds in the low season, and excess inventories would make the price drop steeper compared with this quarter," the report said.

The weakening demand for mobile DRAM will be another unfavorable factor for Samsung.

"The first quarter of the year is normally a low season for the DRAM market, and the demand momentum from smartphone shipments in the first quarter of 2019 tends to be weaker than in previous years. As a result, the price decline for mobile DRAM may become steeper then," the report said.


Emailbaekby@koreatimes.co.kr Article ListMore articles by this reporter
 
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