Samsung Electronics reported lower fourth-quarter results in line with its earlier guidance, blaming the weaker economic climate and lower demand for its semiconductor and smartphone products. The company expects earnings to fall in 2019 again, due mainly to a weaker performance at its memory chip business. Demand for memory products and OLED panels is expected to pick up from the second half of the year, Samsung said.
In Q4, the company reported revenues down 10 percent to KRW 59.27 trillion, and operating profit fell 29 percent to KRW 10.8 trillion. Net profit was down 31 percent to KRW 8.46 trillion.
In a year of otherwise record results, the company saw the final quarter hit by slowing demand for memory chips used in data centres and smartphones. The System LSI and Foundry businesses also saw profits decline due to weak seasonality, and the profit from the display business fell due to increased competition. Smartphone shipments and prices were both down in the fourth quarter amid a flat, highly competitive market, while the consumer electronics division grew profits, led by strong sales of premium TVs.
Sluggish smartphone market
The IT and mobile division reported quarterly sales of KRW 23.32 trillion, down 8 percent from a year earlier. That includes an 11 percent fall in mobile revenues to KRW 22.19 trillion. Operating profit at the division declined to KRW 1.51 trillion from KRW 2.42 trillion a year ago. Samsung said seasonal demand was strong, but the overall smartphone market remained "sluggish".
A further seasonal slowdown is expected in Q1, which the company hopes to offset with the launch of the the Galaxy S10 next month. However, overall smartphone shipments are likely to remain at a similar level as Q4 as shipments of the company’s mass-market models have temporarily declined due to a lineup reorganization. This portfolio changed is being carried out to "respond to rapidly changing market trends and the needs of target customers", Samsung said.
For the whole of 2019, demand for smartphones is expected to be at the same level as 2018 while the market average selling price will rise due to the trend of adopting high-end features such as large screens, higher memory capacity, and multi-cameras, the company expects. The environment overall will remain challenging due to the sluggish growth of the global smartphone market and material cost burden. Samsung hopes to buck the trend by launching differentiated products, such as foldable and 5G devices, and cooperating with partners to offer optimized content and expand into new markets. In addition, Samsung will expand its Bixby digital assistant to various devices and connected services to help increase customer tie-in.
At the company's other activities, Samsung said it expects demand in the memory business to remain weak in the first quarter due to seasonality and macroeconomic uncertainties as well as inventory adjustments by major customers. For OLED, profitability is likely to decline, weighed down by slow sales of premium smartphones and rising competition with LTPS LCD products. As for LCD, earnings are expected to decline as a result of large-scale capacity expansions in the industry.
