Samsung expects weak Q1 earnings over chip prices

Seoul: Samsung Electronics Co said on Tuesday that it is expecting weaker-than-predicted business results for the first quarter due to a sharp decline in memory chip and panel prices.

The major smartphone maker is scheduled to release its preliminary first-quarter earnings early in April.

“Due to worse-than-expected business conditions, we expect January-March earnings to remain below the market expectations,” Samsung said in a regulatory filing, Yonhap news agency reported.

The world’s largest memory chipmaker said semi-conductors are expected to fall further by larger-than-expected margins due to weak demand, and prices of LCD panels are also struggling amid a supply glut.

Samsung Electronics traded at 45,250 Won on the Seoul bourse as of 11.12 a.m., down 0.55 per cent from the previous session’s close.

The earnings warning came amid weak chip demand from the smartphone market and the protracted trade war between the US and China.

Although sharper-than-expected decline in chips may have dented the tech firm’s bottom line, analysts expect demand and chip prices to rebound in the second half of the year.

South Korean brokerage houses have sharply downgraded the first-quarter earnings forecasts for Samsung Electronics, citing tumbling memory chip prices.

The market consensus of Samsung’s operating profit for the first three months of the year stands at 8.33 trillion Won ($7.36 billion), down about 47 per cent from a year earlier, according to corporate tracker FnGuide.

Analysts further painted a gloomy picture of Samsung’s earnings for the remaining quarters, saying their operating profits are unlikely to rise on-year.

Samsung said earlier that it will propel technology innovations to tackle the unfavourable business environment and foster new growth drivers, such as Artificial Intelligence (AI) and 5G.