Samsung Electronics mentioned on Friday it was heading for its lowest quarterly revenue in additional than two years as a glut in reminiscence chips, slowing panel gross sales and rising competitors in smartphones hit margins.
The South Korean tech large mentioned first-quarter working revenue seemingly slid 60 p.c from a yr earlier, lacking market expectations and placing it on monitor for its weakest quarterly revenue since late 2016.
Shares in Samsung rose briefly earlier than paring positive aspects to commerce flat following the steerage, as many buyers are already looking forward to an earnings restoration on the again an enchancment in chip costs within the second half of the yr.
“In the second half, reminiscence chip costs could have a delicate touchdown, so falls will gradual, and the discharge of latest iPhones later looks like an excellent signal for Samsung’s show and reminiscence chips,” mentioned Kim Yang-jae, an analyst at KTB Investment and Securities.
The world’s greatest maker of smartphones and reminiscence chips mentioned in a submitting January-March revenue was seemingly KRW 6.2 trillion ($5.5 billion), lacking the KRW 6.eight trillion estimate from analysts in keeping with Refinitiv SmartEstimate.
Revenue seemingly fell 14 p.c from a yr earlier to KRW 52 trillion. The agency will disclose detailed earnings in late April.
Samsung shares have been flat as of 0120 GMT, whereas the broader market up 0.2 p.c.
The agency earlier had warned the quarter could possibly be disappointing because of falls in reminiscence costs, and slowing demand for show panels utilized in Apple’s iPhones.
Samsung’s premium Galaxy smartphones in the meantime are struggling to be worthwhile because of rising prices of innovation, competitors from Chinese rivals and the reluctance of shoppers to improve, analysts have mentioned.
Samsung’s share value has leapt greater than 25 p.c since sinking to a two-year low in early January as some buyers wager on a restoration in chip demand.
SK Hynix, Micron Technology, and Samsung – which dominate the worldwide marketplace for dynamic random entry reminiscence, or DRAM, chips utilized in private computer systems, smartphones and servers – not too long ago have issued upbeat assessments of the prospects for a restoration in chip costs.
Hopes have been buoyed additional when knowledge confirmed the manufacturing sector in China, the world’s greatest smartphone market, unexpectedly returned to progress for the primary time in 4 months in March.
Samsung is betting a brand new line-up of smartphones together with a foldable handset and a 5G-enabled mannequin will assist enhance its market share in China, which crashed with the appearance of cheaper Chinese rivals like Huawei Technologies.
But its newest telephones are costly to make, weighing on profitability whilst its sells sooner than its predecessor, analysts say.
“New smartphones popping out within the second half will not essentially assist its smartphone enterprise, however will likely be a plus for Samsung’s chip aspect as these telephones require excessive density chip adoptions,” mentioned Park Sung-soon, an analyst at BNK Securities.
© Thomson Reuters 2019