SEOUL (Reuters) – The percentages are stacked towards Samsung Electronics Co Ltd forward of the discharge of its first-quarter earnings steerage on Friday, with reminiscence chip costs falling and its expensive premium smartphones struggling to be worthwhile.
FILE PHOTO: A customer makes use of a cell phone on the Samsung sales space on the Cell World Congress in Barcelona, Spain, February 26, 2019. REUTERS/Rafael Marchante/File Photograph
The South Korean tech large took the distinctive step final week of issuing a pre-guidance warning that the quarter would possible miss market expectations as a consequence of falls in chip costs and slowing demand for show panels.
Samsung Electronics was forecast to put up a 6.9 trillion received ($6.1 billion) working revenue for the January-March interval, in response to Refinitiv SmartEstimate, greater than 50 p.c beneath the 15.6 trillion received recorded in the identical interval a 12 months in the past.
“After Samsung’s uncommon assertion about lacking market expectations, I’m ready if there’s an earnings shock for the primary quarter and anticipating troublesome occasions for Samsung to proceed into the second quarter till the autumn in chip costs slows,” stated Kwon Sung-ryul, an analyst at DB Monetary Funding.
Chipmakers particularly have been hit onerous by a glut within the world semiconductor business triggered by weakening smartphone gross sales and falling funding from information middle firms.
On prime of this, China’s slowing financial development, the Sino-U.S. commerce struggle and Brexit are combining to tug down earnings for makers of shopper electronics world wide.
Shares in Samsung Electronics – the world’s greatest maker of reminiscence chips, smartphones and show panels – have misplaced 6 p.c previously 12 months, whereas its South Korean chipmaking rival, SK Hynix Inc, has fallen 6 p.c in the identical interval.
Though Samsung’s DRAM chip enterprise stays its earnings engine-room with sturdy margins, its NAND flash reminiscence chips are forecast to put up losses as costs stoop, analysts say.
NAND flash chip costs dropped 20 p.c within the first quarter, their steepest fall since early 2018, and continued to slip albeit at a slower tempo within the second quarter, in response to DRAMeXchange, a division of tech analysis agency TrendForce.
Samsung is because of publish its detailed earnings later this month.
NEW SMARTPHONE BOUNCE?
Earnings in Samsung’s one other key element enterprise, show panels, have been hit by falling gross sales to giant prospects like Apple Inc, whose troubles in China have rippled via its world provide chain.
Apple reported a income drop of 26 p.c within the larger China area in the course of the quarter ending in December, because it weathers a contracting smartphone market, growing strain from Chinese language rivals, and slowing improve cycles.
With its Chinese language market share within the doldrums, Samsung unveiled a brand new line-up of smartphones earlier this 12 months together with a foldable telephone, hoping to influence customers to improve from units which already meet most of their wants.
It has stated its new Galaxy flagship smartphones are promoting effectively in China and it’s assured it will probably reverse the latest stoop in its fortunes on this planet’s greatest smartphone market.
However its newest flagship telephone is pricey to make, weighing on profitability whilst its sells quicker than its predecessor, analysts say.
“Gross sales aren’t unhealthy, however its Galaxy smartphone’s revenue construction isn’t higher due to excessive prices,” Kwon of DB Monetary Funding stated.
The Galaxy can be dealing with stiffer competitors with the revealing in Paris final week of Chinese language rival Huawei’s new flagship telephone, the P30 Professional.
Reporting by Ju-min Park; Enhancing by Stephen Coates