Samsung Electronics Co said on Tuesday its operating profit plunged 28.7 percent in the fourth quarter compared with a year ago due to weak memory demand, falling far short of market expectations. Operating profit came to 10.8 trillion won ($9.66 billion) in the October-December period, the South Korean tech behemoth said in a regulatory filing. This is down 38.5 percent from 15.1 trillion won posted a quarter earlier, Yonhap news agency reported.
The operating profit was the lowest since the first quarter of 2017. Sales fell 10.6 percent on-year to 59 trillion won over the cited period, the company said. The operating profit was far below market expectations of 13.6 trillion won, based on the survey conducted by Yonhap Infomax, the financial arm of Yonhap News Agency, on 23 South Korean brokerage houses.
Samsung did not announce the net profit for the fourth quarter, nor the performances of respective business divisions. The finalized earnings report will be announced later this month. For 2018, the company expected the operating profit and sales to reach 58.9 trillion won and 243.5 trillion won respectively on the back of strong demand for memory chips in the global market. The sales estimate is the record-high annual figure.
Samsung said demand for memory chips in the last three months of 2018 hovered far below the market expectation as major data centers adjusted their inventories, which drove down prices of DRAM products. Sales of smartphones also slowed in the maturing market with promotion costs in the peak season cutting into its profitability, it noted.
“Operating profits sharply decreased due to lackluster demand in the memory division and intensifying competition in the smartphone sector,” Samsung Electronics said in a rare release for a preliminary earnings report. The prices of DRAM, a type of memory used for the temporary storage in computer systems, sank 10 percent in the fourth quarter from the previous quarter due to weak demand for PCs, servers and smartphones, according to corporate tracker DRAMeXchange. Apple last week downgraded its sales forecast for the last three months of 2018, suggesting a drop in orders for Samsung, one of the major chip providers for iPhones.