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HomeTechnology NewsSamsung Elec upbeat on chip outlook as third-quarter profit plunges

Samsung Elec upbeat on chip outlook as third-quarter profit plunges

SEOUL (Reuters) – Samsung Electronics Co Ltd said chip sales should pick up next year after it reported on Thursday that third-quarter operating profit more than halved due to low prices of memory chips amid a prolonged industry downturn.

Samsung said there were positive signs for the chip outlook thanks to anticipated demand from data-centre customers and the continuing expansion of 5G smartphones.

But the South Korean tech giant warned that prospects for semiconductor sales in 2020 were shrouded in uncertainty around the macroeconomic environment, a likely reference to the future of U.S.-China trade relations.

The result came after Samsung smartphone rival Apple Inc said holiday-quarter sales would beat Wall Street expectations, citing demand for services, wearables and its latest iPhones.

Samsung said operating profit was 7.8 trillion won ($6.7 billion), slightly above the 7.7 trillion won estimate the company released earlier. Revenue fell 5.3% to 62 trillion won, in line with its earlier estimates.

The semiconductor business – by far Samsung’s main source of income – reported operating profit or 3.1 trillion won, less than a quarter of its take in the same period last year amid oversupply and falling global demand for electronics.

Samsung’s profit has slumped on-year for four consecutive quarters and it is expected to fall again in the current quarter, before recovering next year on the back of stronger chip sales, analysts say.

“Global 5G smartphone sales will be in full swing next year, supporting solid memory-chip demand growth,” said analyst Park Sung-soon at Cape Investment & Securities.

Samsung’s cross-town chip rival, SK Hynix, also expects 5G-enabled smartphones to help lift the global memory market out of the doldrums next year.

SMARTPHONE DEMAND STILL WEAK

The world’s top maker of memory chips and smartphones sees fourth-quarter demand for mobile phones weakening due to “persistent global economic uncertainties”, the company said.

“The company expects fourth-quarter earnings in the Mobile Business to decrease QoQ as marketing costs are set to rise and shipments to decline slightly, with flagship model sales weakening from their post-launch peak,” Samsung said in a statement.

Even so, the company is betting on robust growth in the markets for 5G and foldable phones next year. Just this week it unveiled a design for a phone that can fold into a square, hinting at its next innovation in the foldable segment.

The mobile business posted a 32% rise in operating profit to 2.9 trillion won in the third quarter.

Analysts say strong smartphone sales cushioned the overall profit fall, with U.S. sanctions on Huawei Technologies effectively barring U.S. firms from supplying the Chinese competitor.

Samsung shares gained 1.8% versus a 0.7% rise in the wider market as of 0104 GMT.

Reporting by Ju-min Park and Heekyong Yang; Editing by Stephen Coates