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(LEAD) Samsung's Q4 operating profit tumbles 28.7 pct on-year

All Headlines 10:02 January 08, 2019

(ATTN: UPDATES with more details from paras 8-13; ADDS photo)
By Kim Eun-jung

SEOUL, Jan. 8 (Yonhap) -- Samsung Electronics Co. said Tuesday its operating profit plunged 28.7 percent in the fourth quarter compared with a year ago, falling short of market expectations.

Operating profit came to 10.8 trillion won (US$9.66 billion) in the October-December period, the South Korean tech behemoth said in a regulatory filing. This is down 38.5 percent from 15.1 trillion won posted a quarter earlier.

The operating profit was the lowest since the first quarter of 2017.

Sales fell 10.6 percent on-year to 59 trillion won over the cited period, the company said.

The operating profit was below market expectations of 13.6 trillion won, based on the survey conducted by Yonhap Infomax, the financial arm of Yonhap News Agency, on 23 South Korean brokerage houses.

Samsung did not announce the net profit for the fourth quarter, nor the performances of respective business divisions. The finalized earnings report will be announced later this month.

For 2018, the company expected the operating profit and sales to reach 58.9 trillion won and 243.5 trillion won, respectively, on the back of strong demand for memory chips in the global market. The sales estimate is the record-high annual figure.

Kim Hyun-suk, president of Samsung Electronics Co., presents new products during a press conference held in Las Vegas on Jan. 7, 2019, ahead of the opening of the Consumer Electronics Show. (Yonhap)

Industry watchers attributed the earnings shock to weak demand for DRAMs by data center servers and stagnant growth of handset sales in maturing smartphone markets.

Apple last week downgraded its sales forecast for the last three months of 2018, suggesting a drop in orders for Samsung, one of the major chip providers for iPhones.

South Korea's semiconductor exports, dominated by Samsung Electronics and its smaller rival SK hynix, dropped 17 percent on-year to $8.86 billion in December, according to the government data.

"The global data center servers temporarily suspended their DRAM purchases, and demand for new IT products in China and emerging markets fell below the market expectation," Lee Jae-yoon, an analyst at Yuanta Securities, said.

Analysts projected downbeat prospects for the world's largest chip and phone maker in 2019.

"If the weak chip demand is affected by the data centers' temporary inventory adjustment, the business environment will get better in the second half of 2019. But if it's about a shift in the capacity expansion plan in the short term, the situation is different," Lee Seung-woo, an analyst at Eugene Investment & Securities, said. "This year's prospects for the semiconductor industry are shrouded in clouds."

Shares of Samsung Electronics traded at 39,100 won as of 09:50 a.m., up 0.9 percent from the previous session. The fourth-quarter report was announced before the market opened Tuesday.

(LEAD) Samsung's Q4 operating profit tumbles 28.7 pct on-year - 2

ejkim@yna.co.kr
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