Samsung Electronics recorded the highest profits in its history in the last quarter, but the results are not as good in three months. The company today issued forecasts warning that revenues and profits for the quarter ended December 31, 2018 would be sharply lower than the previous year. Samsung expects sales of about 59 trillion won (about $ 52.5 billion), down 11 percent from 12 months the previous year, while operating profit is expected to fall by about 29 percent to about 10.8 billion won (about $ 9.6 billion).
The forecast shocked investors and analysts, who, according to CNBC, were expecting operating profit of 13.2 trillion won, for a business turnover of $ 62.8 trillion. Unusually, Samsung has issued a statement explaining its advice. the company normally waits for full results to be published before commenting on its performance in detail.
Samsung hopes 5G and foldable software will revive mobile fortunes
The two main factors behind Samsung's poor performance are: "poor demand in the memory sector" and "increased competition in the smartphone sector". The memory shipments reportedly declined due to unexpected adjustments in Samsung's data center customer inventories, while the company claims to have spent more on smartphone marketing despite steady sales and a strong seasonality. The results were also apparently affected by an unspecified "non-recurring expenditure".
For the current quarter, Samsung expects earnings to remain "moderate" due to sluggish memory demand, but the situation is expected to pick up in the second half of the year. At the same time, Samsung is betting on 5G and foldable devices to improve the performance of its mobile division, and says its OLED panels for smartphones will continue to increase market penetration.
It's tempting to compare the awkward situation of Samsung to that of Apple, which has also issued an unusual profit warning this month. Both companies are suffering from a growing demand for smart phones and, while only Apple has designated China as a major factor, Samsung has also faced intense competition from Huawei and Xiaomi in this market. However, the memory challenges are unique to Samsung and we will have to wait for the full release of the results later this month for more specific financial details.