Samsung warns profit to fall 60%

NEW ERA: The firm yesterday launched the 5G version of its Galaxy S10 after South Korea won the race to commercially launch the world’s first nationwide 5G networks

AFP, SEOUL





The world’s biggest smartphone and memorychip maker Samsung Electronics Co yesterday warned of a more than 60 percent plunge in first-quarter operating profit in the face of weakening markets.

Operating profit for the first quarter would be “approximately 6.2 trillion won [US$5.45 billion],” the firm said in a statement, down 60.4 percent year-on-year.

Sales were about 52 trillion won, it said, marking a 14 percent drop.

The day’s first SK Telecom customer shows his new Samsung Galaxy S10 5G smartphone during a launch event at an SK Telecom shop in Seoul yesterday. Photo: AFP

The firm has enjoyed record profits in recent years, despite a series of setbacks, including a humiliating recall and the jailing of its de facto boss, but now the picture has changed, with chip prices falling as global supply increases and demand weakens.

The company’s earnings estimate was below analyst forecasts of 6.9 trillion won, according to Bloomberg News.

It would represent the firm’s lowest operating profit since the third quarter of 2016 and it comes after the firm reported its first fall in quarterly profit for two years in January.

Samsung shares yesterday closed down 0.2 percent in Seoul.

The company has to contend with increasingly tough competition in the smartphone market from Chinese rivals such as Huawei Technologies Co (華為) — which in 2017 surpassed Apple Inc to take second place — offering quality devices at lower prices.

Samsung supplies components to other manufacturers such as Apple as well as making its own devices, but market prices for LCDs have fallen 10 percent quarter-on-quarter, said Sanjeev Rana, an analyst at investment firm CLSA Ltd, while demand for smartphones in China — the world’s biggest market — has been weak.

Prices for NAND memory — used in smartphones and other devices — fell 20 percent in the first quarter, according to market tracker DRAMeXchange, which pointed the finger at consumers taking longer to replace their smartphones and lower-than-expected sales of Apple’s new devices.

DRAM chips, used in computer servers, fell by similar levels, it added.

Rana predicted a “slight” rebound in the second quarter.

“This quarter is the bottom in terms of earnings,” Rana said.

Samsung was yesterday launching the 5G version of its top-end Galaxy S10 smartphone — the first such device available anywhere — after South Korea this week won the global race to commercially launch the world’s first nationwide 5G networks.

South Korea’s three telecoms — SK Telecom, KT and LG Uplus — held launch events across Seoul for the Galaxy S10, whose base version costs 1.39 million won.

Before yesterday’s debut of the Samsung phone, 5G services had been restricted to a handful of specially selected users in South Korea.

Rival manufacturer LG Electronics Co is due to launch its V50 ThinQ, another 5G phone, later this month, while in the US, Verizon Communications Inc’s network works with Lenovo Group Ltd’s (聯想) Moto Z3 smartphone fitted with a special accessory.

Commercializing 5G gives South Korea the chance to build around the technology, which is crucial for the future development of devices such as autonomous vehicles and the Internet of Things.

It is expected to bring about US$565 billion in global economic benefits by 2034, according to the London-based Global System for Mobile Communications, an industry alliance.