Samsung is Looking at a Q1 Drop of 60 Percent
Samsung Electronics just released its first quarter earnings guidance for 2019 and the numbers are not looking so good.
From January to March, the South Korean tech giant has estimated its operating profits to be around 6.2 trillion Korean won ($5.5 billion USD) marking a 60 percent decline from last year’s 15.64 trillion won ($14.4 billion USD). Samsung’s predictions for overall revenue were down too but not nearly as much as operating profits. Those numbers fell 14 percent from last year coming in at a total of 52 trillion won ($45 billion USD) for 2019. A detailed report and final earnings are expected to roll in later this month.
But Samsung saw this one coming from a mile away.
The company released a warning ahead of the earnings guidance about the impending low numbers, which is likely why shares did not drop as drastically as one would have expected. Samsung seemed to point their fingers at price declines in memory chip products and a slowing demand for display panels like the OLED display they make for Apple’s iPhones. Data centers just aren’t buying up memory chips like they have in the past, and it’s affecting everybody across the board in the semiconductor sector. And there seems to be no light at the end of the tunnel, for now at least.
“I think this earnings decline will continue for the time being, especially on the memory side,” Sanjeev Rana, senior analyst at brokerage firm told CNBC. “We expect 2Q (second quarter) to be the profit trough for memory earnings for companies like Samsung and (SK) Hynix.” He went on to note that some memory chips could fall up to 20 percent in the next quarter and beyond. Several other analysts agree though that memory demand should recover in the second half of the year.
Samsung is also leaning on (you guessed it) the Galaxy Fold and the Galaxy S10 5G to help boost their struggling numbers. South Korea went live with its 5G network today in a somewhat anti-climatic follow up to Verizon’s launch on Wednesday. Even so, the 5G launch puts the Galaxy S10 5G in a promising position over there, and the public’s excitement over the idea of 5G might just be the spark Samsung needs at this point.