South Korean electronics giant Samsung expects to report a sharp dip in profits for its final 2019 quarter amid a protracted slump in the prices of memory chips.
In a short statement the company forecast an operating profit of around 7.1 trillion Korean won ($6.1 billion) for the just-ended fourth quarter, down from the figure of KRW10.8 trillion ($9.3 billion) it reported for the same period of 2018. Samsung also expects to report sales of about KRW59 trillion ($50.6 billion) for the quarter, down slightly from KRW59.27 trillion ($50.8 billion) a year earlier.
Despite the forecast of a dip in profits, Samsung's share price closed up 1.79% in Seoul following today's announcement. The stock rose because analysts who track the company were expecting an even sharper fall in operating profits.
The company will provide more details of the performance within separate divisions when it publishes its fourth-quarter report on January 22.
Why this matters
As one of the world's biggest technology companies, Samsung is regarded as a bellwether for several big global sectors, including the smartphone and chip markets. Mainstream press reports suggest analysts who were expecting a gloomier earnings forecast have taken some encouragement from Samsung's outlook, seeing in it the green shoots of a recovery in chip prices.
That could all point to rising demand for smartphones and other connected gadgets this year following a downturn in 2019. Device replacement cycles have lengthened as consumers have chosen to make do with their existing handsets rather than upgrade to the latest models. The lack of exciting new features in the latest smartphones has been widely blamed for the slump.
But the arrival of the 5G standard, and this year's launch of additional handsets compatible with new, "superfast" technology, could provide a welcome spur to the market. A 5G iPhone is eagerly anticipated later this year, and other well-known brands are also poised to unveil 5G-compatible smartphones in 2020.
There have also been signs of an easing in some of the trade tensions between the US and China, as well as an uptick in chip demand from data center operators, according to Bloomberg Intelligence.
Anthea Lai, an analyst with Bloomberg Intelligence, said in a statement: "A strong demand comeback from server customers may restore Samsung's inventory back to normal levels earlier than expected in 2020."
— Iain Morris, International Editor, Light Reading