Samsung warns of sales and profit decline

Jung Yeon-je  AFP  Getty Images

Samsung once also had a 20 percent market share in China but has seen its sales tumble to less than one percent of the world's largest smartphone market in the third quarter, and last month announced the closure of its factory in Tianjin.

The South Korean company reported preliminary operating income dropped to 10.8 trillion won (US$9.65 billion) for the period that ended in December, missing the average analyst estimate compiled by Bloomberg by 22 per cent.

"Depressed demand in China will further drive down Samsung's chip sales there".

Samsung shares lost 24 per cent previous year, capping its worst performance since 2000, as the stock took a beating from sliding chip prices and a slowdown in fresh smartphone demand.

Samsung's memory and processor chips, which account for over three-quarters of its earnings and about 38 percent of sales, power smartphones including those from China's biggest handset maker Huawei Technologies Co.

Tech giant Samsung has seen a 29 per cent fall in profits amid mounting competition from Chinese phone makers.

"Apple's iPhones have not been selling well in China at least since Huawei's chief finance officer was arrested. Demand for IT products in China and other emerging markets is also poorer than expected".

Samsung's shares fell as much as 2.1 percent before paring losses at midday in Seoul.

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In a short press release, Samsung said the expected consolidated sales are approximately KRW59 trillion, while the operating profit should be around KRW10.8 trillion.

Demand for DRAM memory chips "will hit a low in the fourth quarter of 2019", he added.

Samsung said it expects earnings to remain subdued in the first three months of the year due to hard conditions for memory. The World Bank has estimated the weakest GDP expansion for the country in almost three decades this year.

These announcements come after Apple CEO Tim Cook sent a letter to investors last week cautioning them not to expect strong first quarter earnings since the company had sold fewer iPhone upgrades than expected, citing its Chinese market in particular, as well as "some developed markets".

Samsung's profit is expected to decline through 2019 as the weakness persists, Refinitiv data showed.

"The most important thing from here is for the pace of decline in chip prices to slow, which I expect will happen in the second quarter".

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

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