Samsung Electronic issued guidance today warning that revenue and profits for the three months ending December 31st, 2018, will be sharply down year-on-year. It has estimated a 29% drop in quarterly operating profit, its first decline in two years, as it flagged tough memory chip and mobile phone markets in a rare commentary.
Deteriorating relations between the U.S. and China, Samsung’s two biggest export destinations have hit demand for memory used in everything from personal computers to mobile devices, raising the pressure on a company struggling to revitalize its smartphone business. Compounding that challenge is a weakness at the rival and significant customer of components, Apple, which shocked global markets last week when it cut its sales outlook for the first time in almost two decades.
The two main factors in Samsung’s poor performance are identified; unusually, Samsung has issued a statement explaining its guidance; the company typically waits for the full earnings release before commenting on its performance in detail.
Newman explained that data center companies that buy memory chips from Samsung and other chipmakers have slowed down their orders in the last few months. He said that the slowdown was a major driver of the magnitude of Samsung’s profit miss.
It’s tempting to compare Samsung’s predicament to that of Apple, which also issued an uncharacteristic earnings warning this month. According to International Data Corporation, over the third quarter of 2018, Samsung saw a more than a 13 percent year-over-year decline in global smartphone shipments.