Things aren't looking good for Samsung Electronics ahead of its Q2019 XNUMX financial report, with memory chip prices falling and high-end premium smartphones struggling in the market. The South Korean tech giant took the exceptional step last week by issuing an early warning that its first-quarter financial results are likely to fall short of market expectations due to falling chip prices and slowing demand for screen panels.
"After Samsung's out-of-the-box announcement of a discrepancy with market forecasts, I expect a rather shocking financial report and I believe that difficult times for Samsung will continue into the second quarter until the fall in chip prices slows down," said Kwon Sang-ryul, an analyst at DB Financial Investment. Sung-ryul).
Chip makers in particular have been hit hard by a glut in the global semiconductor industry driven by weaker smartphone sales and falling investment from major data center companies. On top of this, a slowdown in China's economic growth, the latter's trade war with the United States, the preparation of Brexit are superimposed - all this leads to a decrease in the profits of electronics manufacturers around the world.
Over the past 12 months, stock prices of Samsung Electronics, the world's largest manufacturer of memory chips, smartphones and screen panels, have fallen by 6 points. South Korean memory-chip rival SK Hynix saw its share price fall by the same 6% year-over-year. Analysts note that while Samsung's DRAM chip business remains a strong revenue generator with strong margins, NAND flash memory chips are expected to lose money due to lower prices, analysts predict. According to DRAMeXchange, the cost of flash memory chips fell by 20% in the first quarter of the year alone, the sharpest decline since the beginning of 2018, and it will continue into the second quarter, albeit at a slower pace.
Profits from sales of Samsung's other key component, display panels, also suffered from falling demand from large customers like Apple, whose problems in China have affected the entire global supply chain. Apple reported a 26% decline in revenue in China for the last quarter of 2018, driven both by increased competition from local manufacturers and slower smartphone update cycles.
Samsung is also facing a rapidly shrinking presence in the Chinese market. The company recently introduced a new series of flagship devices Galaxy S10, as well as a flexible smartphone Galaxy Fold. The manufacturer hopes to attract consumers to its devices again. The Korean giant said its new flagship Galaxy smartphones are selling well in China and expressed confidence that it could turn the slump in the world's largest smartphone market.
But the new flagship Galaxy S10 handsets are relatively expensive to manufacture, which analysts say hurt profitability, even though the handsets are selling better than the previous generation. “Sales are good, but the profit structure of Galaxy smartphones has not improved due to the high cost,” said Mr. Kwon from DB Financial Investment.
The Galaxy S10 also faces stiff competition, with the new flagship phone Huawei P30 Pro being unveiled in Paris last week, which can offer 10x optical zoom, among other things.
Source: 3dnews.ru