Published: Wed, January 09, 2019
Business | By Eloise Houston

Samsung warns over 'stagnant' smartphone market

Samsung warns over 'stagnant' smartphone market

Samsung Electronics Co.'s quarterly profit and sales missed estimates on sputtering demand for memory chips during the last three months of 2018, the same quarter that Apple Inc. reported anemic sales in China.

For the fourth quarter of 2018 Samsung had consolidated sales of "approximately 59 trillion Korean won" with a consolidated operating profit of "approximately 10.8 trillion Korean won".

"Memory earnings fell significantly. due to weaker-than-expected demand amid inventory adjustments at data-center customers", it said.

While Samsung still leads the world in smartphone sales, it's being squeezed by Chinese handset makers like Huawei Technologies Co.

Samsung is blaming the decline in its memory chip business.

The announcement comes on the heels of Apple's earnings warning - its first since 2002 - in which CEO Tim Cook said in a letter to investors that the iPhone maker expects first-quarter revenue of about $84 billion, down from the previous guidance of between $89 billion and $93 billion.

Prices of NAND flash memory chips, which hold data permanently, slipped 15 per cent.

Demand for DRAM memory chips "will hit a low in the fourth quarter of 2019", he told AFP news agency.

DRAMeXchange anticipates memory chip prices to fall 10 percent on an average in the first quarter of 2019. Its earnings report is due on Jan 29.

It also said a "stagnant and fiercely competitive smartphone market" pressured its income and that the firm would continue to innovate its product line such as foldable and 5G models. "It is not. The smartphone market is already saturated", said senior analyst Greg Roh at Hyundai Motor Securities.

"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".

"You see, Apple's iPhones are already losing sales in China. That's even worse for Samsung because that would drag its chip prices down", Roh said, referring to Apple as a Samsung chip client. The firm has said it was not aware of any wrongdoing.

Samsung has a less than 1 percent share of China's smartphone market, versus 9 percent for Apple. The wider market was up 0.1 percent rise.

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