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Samsung forecasts huge profit drop on slower smartphone and chip sales

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Samsung forecasts huge profit drop on slower smartphone and chip sales
The Samsung Galaxy S9

With smartphone sales slowing and memory chip demand on the decline, industry analysts already expected a drop in profit for Samsung. But today the South Korean giant announced its own estimates and it appears the results are significantly worse.

After reporting a $13.27 billion profit just one year ago, Samsung has today revealed that its profits for the fourth quarter of 2018 are set to decline a whopping 29% year-on-year to just $9.67 billion. To make matters worse, this figure also represents a drop of 38.5% from the record high of $15.6 billion in profit registered in the previous quarter. Total sales are also down 10.6% from the year prior to $52.7 billion.

Moving on to the reasons why, it seems the intensifying competition from Chinese rivals have affected the brand more than initially expected in the smartphone market. Alongside this, Samsung’s profit margins also took a hit by higher marketing spending throughout the holiday season. Nevertheless, the South Korean giant remains optimistic about its future and hopes to solidify its market leadership with 5G and its upcoming foldable smartphone.

Elsewhere, demand for the company’s memory chips fell drastically too as companies reined in spending. This subsequently caused a larger-than-expected dip in prices.

Moving forward, Samsung expects its weak performance to continue throughout the first quarter of 2019. However, it does anticipate a slight rebound in the second half of the year as memory chip demand rises. The South Korean giant will announce more details later on this month alongside its full Q4 2018 report.

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