Samsung Electronics warned lower earnings for dropping chip prices

Samsung Electronics Co Ltd is due to be releasing its first-quarter earnings guidance on Friday, but it’s rare  pre-guidance warning issued last week highlighted that odds are staking against...

Samsung Electronics Co Ltd is due to be releasing its first-quarter earnings guidance on Friday, but it’s rare  pre-guidance warning issued last week highlighted that odds are staking against the tech giant because of struggling position of its premium smartphones to make profits and falling memory chips prices.

In its last week pre-guidance, the South Korean tech giant, taking an exceptional  step, warned that the quarter quarterly results could possibly be missing market expectations as demands for its display panels come to slow down and also chip prices are trending downward.

Samsung, for January-March quarter, was expected to post an operating profit of 6.9 trillion won ($6.1 billion), according to Refinitiv SmartEstimate and that would be less than half of the operating profit of 15.6 trillion won recorded by the company in the same period a year ago.

Lessened investments from data companies and declining smartphone sales have caused a flood in the global semiconductor industry which specifically troubled the chipmakers.

And most of all, global political issues like Brexit, Sino-US trade tensions and sluggish economic growth in China jointly played a role in pulling down the profits of consumer electronics manufacturers around the world.

Samsung Electronics is the world’s biggest memory chip maker but in last 12 months, it has been facing lowering share prices which fell by 6 percent while another South Korean chipmaker SK Hynix Inc, which rivals Samsung, also saw a loss of 6 percent in its share price in the same period.

Although DRAM chip business of Samsung will continue to be the profit making segment with strong margins but company’s NAND flash memory chips are likely to be posting losses in the current quarter because of the weakening prices, analysts says.

NAND flash chip to see a price fall of 20 percent in the first quarter which will be the largest decline since early 2018 and continued to be sliding down in second quarter also because of the industry’s slow pace, according to DRAMeXchange, a division of tech research firm TrendForce.

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