Samsung Electronics stated on Friday it was heading for its lowest quarterly revenue in additional than two years as a glut in reminiscence chips, slowing panel gross sales and rising competitors in smartphones hit margins.
The South Korean tech large stated first-quarter working revenue doubtless slid 60 p.c from a yr earlier, lacking market expectations and placing it on monitor for its weakest quarterly revenue since late 2016.
Shares in Samsung rose briefly earlier than paring positive factors to commerce flat following the steerage, as many buyers are already waiting for an earnings restoration on the again an enchancment in chip costs within the second half of the yr.
Samsung provides reminiscence chips and screens for its personal smartphones and Apple, and server chips for cloud firms equivalent to Amazon. Its semiconductor enterprise is the principle revenue driver.
“Within the second half, reminiscence chip costs could have a delicate touchdown, so falls will sluggish, and the discharge of latest iPhones later looks like a very good signal for Samsung’s show and reminiscence chips,” stated Kim Yang-jae, an analyst at KTB Funding and Securities.
The world’s largest maker of smartphones and reminiscence chips stated in a submitting January-March revenue was doubtless KRW 6.2 trillion ($5.5 billion), lacking the KRW 6.eight trillion estimate from analysts in accordance with Refinitiv SmartEstimate.
Income doubtless fell 14 p.c from a yr earlier to KRW 52 trillion. The agency will disclose detailed earnings in late April.
Samsung shares had been flat as of 0120 GMT, whereas the broader market up zero.2 p.c.
The agency earlier had warned the quarter could possibly be disappointing attributable to falls in reminiscence costs, and slowing demand for show panels utilized in Apple’s iPhones.
Samsung’s premium Galaxy smartphones in the meantime are struggling to be worthwhile attributable to rising prices of innovation, competitors from Chinese language rivals and the reluctance of shoppers to improve, analysts have stated.
Samsung’s share value has leapt greater than 25 p.c since sinking to a two-year low in early January as some buyers guess on a restoration in chip demand.
SK Hynix, Micron Expertise, and Samsung – which dominate the worldwide marketplace for dynamic random entry reminiscence, or DRAM, chips utilized in private computer systems, smartphones and servers – not too long ago have issued upbeat assessments of the prospects for a restoration in chip costs.
Hopes had been buoyed additional when information confirmed the manufacturing sector in China, the world’s largest smartphone market, unexpectedly returned to development for the primary time in 4 months in March.
Samsung is betting a brand new line-up of smartphones together with a foldable handset and a 5G-enabled mannequin will assist increase its market share in China, which crashed with the arrival of cheaper Chinese language rivals like Huawei Applied sciences.
However its newest telephones are costly to make, weighing on profitability whilst its sells sooner than its predecessor, analysts say.
“New smartphones popping out within the second half will not essentially assist its smartphone enterprise, however might be a plus for Samsung’s chip facet as these telephones require excessive density chip adoptions,” stated Park Sung-soon, an analyst at BNK Securities.
© Thomson Reuters 2019