Samsung Q4 profit falls from lower chip demand

Samsung's record streak of revenue growth has ended as of Q4 2018 due to lower demand for memory chips.

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(Image: Corinne Reichert/ZDNet)

Samsung Electronics expects operating profits of 10.8 trillion won for the fourth quarter of 2018, the company said in its earnings guidance.

It is a fall of 28.7 percent from the same period last year and a decrease of 38.5 percent from the previous quarter's record 17.57 trillion won.

The steep profit drop ends Samsung's streak of record revenue growth from the past two years due to unprecedented demand in memory semiconductors.

The South Korean tech giant said profits fell sharply due to lacklustre demand in the memory business and intensifying competition in smartphones.

Inventory adjustments from data centre customers caused weaker demand and the drop of average sales prices, it said, in a rare statement accompanying the guidance.

Though the fourth quarter traditionally sees weak demand for memory chips, analysts in South Korea were still expecting operating profits of around 13 trillion won.

The weak guidance from Samsung follows Apple lowering its revenue outlook last week, citing rough Chinese market conditions and lower than expected iPhone revenue in Greater China as some of the factors for its lowered expectations.    

Samsung said earnings will remain "subdued" in the first quarter of 2019 but will rise again in the second half of the year.

It also said OLED panels are expected to be in high demand in smartphones as the company expands its range of applications.

In mobile, Samsung said it will fortify its leadership in the smartphone market via foldable and 5G smartphones while increasing specifications for its low- to mid-range models.

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