Samsung Posts Lower Profit, Anticipates End of Chip Slump
January 29 2020 - 8:47PM
Dow Jones News
By Eun-Young Jeong
SEOUL -- Samsung Electronics Co. reported a 38.5% decline in
fourth-quarter net profit though projected improved market
conditions in 2020, as the chip industry starts to pull out of a
protracted slump.
The South Korean tech giant reported a quarterly net profit of
5.2 trillion won ($4.4 billion) for the last three months of 2019,
versus 8.46 trillion won the prior year. But the net profit slide
was less dramatic than Samsung's third-quarter year-over-year dip
of 52%.
Samsung, the world's largest memory-chip maker, posted revenue
of 59.9 trillion won, a 1.06% increase from the previous year.
Earlier this month, Samsung forecast results that beat analysts'
estimates, which had been weighed down over the past year by a
semiconductor glut and the U.S.-China trade fight. Since then,
other chip makers, including Intel Corp. and Taiwan Semiconductor
Manufacturing Co., the world's largest contract semiconductor
maker, have delivered robust results and forecasts, elevating hope
that 2020 will be a return to better days.
Samsung, based in Suwon, South Korea, has also been shielded
somewhat from Trump administration restrictions that have blocked
U.S. business with China's Huawei Technologies Co., which have hurt
some American firms. On Tuesday, U.S. chip maker Xilinx Inc. said
it planned to cut about 7% of its workforce, pointing to lost
business with Huawei and lax 5G adoption.
Samsung weathered challenges in 2019 from a global slump in
memory-chip demand that followed a string of record-breaking
profits in the preceding years. The company's net profit bottomed
out in the first quarter of 2019, reaching its lowest point since
2016's global recall of Galaxy Note 7 smartphones. Operating profit
in 2019 nearly halved from its peak in 2018.
The company, which generated about 75% of operating profits from
semiconductors in 2018, started showing signs of a rebound in the
second half of 2019, backed by rising prices of memory chips and
better-than-expected smartphone sales.
Investors had bet on a turnaround earlier than that. In 2019,
Samsung shares rose 44%, alongside rivals Micron Technology Co. and
SK Hynix Inc. Shares of Samsung continued to hit record highs this
month after the company reported preliminary results for the fourth
quarter.
Samsung, the world's largest smartphone maker, is unveiling a
new lineup of high-end devices next month, and a bigger consumer
embrace of 5G handsets could help boost sales. Huawei and Samsung
are the top 5G phone vendors, accounting for nearly three-quarters
of the 18.7 million 5G devices shipped out in 2019, according to
Strategy Analytics, a market researcher.
Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com
(END) Dow Jones Newswires
January 29, 2020 20:32 ET (01:32 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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