Samsung Electronics Co. Ltd. (Samsung), the world’s leading smartphone giant, is expecting a gradual recovery of its sale of the memory chip and cell phone in the current year. The South Korean tech company has been facing challenges as it witnessed a huge decline in the annual profit at the end of 2019. However, the company also puts into account of the emerging international problems that might affect its recovery forecast.
Heavy Decline of Annual Sale Profits in 2019
On Thursday, January 30, 2020, the tech giant claimed that it also anticipated certain factors that could affect the possibility of demand growth projected by the company. Samsung officials observed that the two challenges including uncertainty over the upcoming US-China trade deal and the new coronavirus outbreak in China primarily posed big threats for the company’s forecasting goals.
With curbing the global supply chains and prospects for consumer demand due to uncertainty over the US-China trade deal, the South Korean conglomerate had achieved to earn its sales’ profit of South Korean (SK) won 27.8 trillion in the last year, the lowest since 2015.
Reuters reported, the company had closed its October-December 2019 quarter with large unsold stockpiles of memory chips whose price was also squeezed due to the US-China trade war. Samsung, which expected to supply its chips to rival smartphone manufacturers such as Apple Inc. and Huawei Technologies Co., had suffered a heavy decline of its operating profits in the fourth quarter (Q4) to 7.16 trillion SK won ($6.13 billion) on weaker chip demand weakening 34% from 2018. The figure indicated that the net profit till the Q4 of the fiscal year 2019 was slipped 38% to 5.2 trillion SK won in contrast to the analysts’ estimation of 5.6 trillion won.
Low Demands are Likely for the Current Quarter
Referring to the existing virus outbreak, Samsung told in a statement to Reuters on Thursday that some factories of its unit in China have shut down their operations as per the guidelines of the Chinese Government. With the existing challenges, Samsung officials shared a view that it also expected low rate demands for the chips and the earning for the current quarter during January-March 2020 would be weaker than the preceding quarters.
Speaking during a conference call, the senior vice president at Samsung’s semiconductor business unit, Han Jin-man said, “The macroeconomic and geopolitical concerns are showing signs of easing recently, but we can’t rule out the possibility that the situation would deteriorate.”
In contrast to Samsung’s forecast, chipmakers such as Intel Corp. and TSMC offered positive outcomes for the current quarter. Samsung SDI, which makes phone batteries and materials for chips and displays, said the virus outbreak would have a major impact on the current quarter earnings.
Meanwhile, Park Sung-soon, an analyst at Cape Investment & Securities claimed, “Samsung offered a conservative outlook for the memory market, and there is a disconnection between market views and the company views when it comes to the strength of the recovery.” As Reuters reported, the conservative forecast of Samsung has brought the company’s shares to slow down by 3.2%.
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