Samsung Electronics Braces for Profit Drop as China Slowdown Chips Away at Demand

Samsung Electronics

Samsung Electronics is set to post its first drop in quarterly operating profit in two decades as slowing economic growth in China, an integral market for the South Korean technology giant, erodes demand for its products.

Revenue is anticipated to have slipped 5 percent, hurt by reduced memory-chip shipments.

This headwind continued to market the industry at the fourth quarter, with overall sales in the world’s top smartphone marketplace China falling 8% in the preceding three months, according to Counterpoint Research.

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China is Key

Samsung Electronics worldwide smartphone business hasn’t yet been spared, with gain at the unit expected to have slumped with a fifth in the fourth quarter, Refinitiv statistics reveal.

Samsung has a less than one percent share of China’s smartphone versus 9% for Apple. However, its memory and processor chips, which account for over three-quarters of its earnings and about 38 percent of earnings, power smartphones such as those from China’s top player Huawei.

Its memory-chip shipments fell 10 percent on an average at the fourth quarter, according to brokerage Eugene Investment & Securities.

More Pain Ahead

Critics state that Apple’s worries and Samsung’s are indicative of tougher times ahead for international businesses, as dismal increase in the world’s second-largest market, exacerbated by a lengthy China-U.S. trade war, takes a toll.

China’s factory activity contracted for the first time in over two years in December. The World Bank has estimated the weakest GDP expansion for the nation in almost 3 decades this season.

Samsung’s profit is expected to decline through 2019 since the weakness persists, Refinitiv information revealed.


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