Published: Fri, January 11, 2019
Money | By Ralph Mccoy

Samsung feels Apple's pain as tech slowdown hits sales

Samsung feels Apple's pain as tech slowdown hits sales

Samsung Electronics Co Ltd is set to post its first drop in quarterly operating profit in two years as slowing economic growth in China, a key market for the South Korean tech giant, erodes demand for its products. Operating profit, meanwhile, dropped 29 percent to about $9.7 billion United States dollars, whereas it was expected to be $11.8 billion.

'Samsung is losing ground to Huawei, Xiaomi and other Chinese rivals in the huge China and India markets, ' Neil Mawston, executive director at market researcher Strategy Analytics, said in a report.

The South Korean firm also said profit would remain subdued in the first quarter due to hard conditions in memory chips, but that the market is likely to improve in the second half of the year as customers release new smartphones.

Fourth-quarter revenue fell 11 percent to 59 trillion won, compared with the 63.6 trillion won average projection compiled by Bloomberg.

Shortly after Apple CEO Tim Cook warned employees and investors that the company's next quarterly financial results won't be rosy, Samsung followed suit with a similar warning of its own. The wider market was up 0.1 percent rise.

The figure was below market consensus of about 13.5 trillion won, according to market researcher FnGuide. Samsung did not provide net income, which it is to do later this month when it releases final results.

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China is a huge smartphone market, accounting for one-third of the world's handset shipments, but its economy has been slowing and many people are leery of the rising trade tensions with the U.S. They have also begun to buy smartphones from Chinese manufacturers such as Huawei and Xiaomi.

But analyst Kim Sun-woo of Meritz Securities said worsening supply and demand conditions for semiconductors and the structural challenges facing Samsung's smartphone business will drag down the firm's profits throughout 2019.

Prices of NAND flash memory chips, which hold data permanently, slipped 15 per cent. Whether or not it's for precisely the same reasons is unclear, but it seems a plateauing smartphone market is at least partially to blame for all three companies' guidance misses.

Despite the deteriorating market environment, Samsung expressed confidence that its profitability would recover in the second half.

Samsung, like Apple, blamed part of the problem on lower-than-expected sales of its latest smartphones.

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