Samsung warns of weaker earnings despite record growth

Samsung reports record 3Q growth due to the popularity of its memory chips, but says it expects the 1Q19 to be bleak in terms of revenue


Despite reporting another quarter of record operating profit for 3Q, Samsung has warned of weaker earnings ahead.

Samsung's operating profit for the July-September quarter grew at almost 21%, increasing by a value of $15.4bn, the South Korean technology giant announced on October 31, beating its previous highest quarterly profit of almost $13.7bn.

The boost in 3Q sales has been largely due to the increased demand for its memory chips, Samsung announced, which have compensated for the slowing down of the smartphone market of late. The operating profit of Samsung's chips grew 37% year-on-year to $11.9bn, while the IT and mobile communications division, which covers smartphones, reported a 32% drop to a value of $1.9bn. Memory chips now account for 80% of the company's business.

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However, Samsung has warned investors that the outlook for early 2019 is bleak due to declining prices and low demand. It stated that "looking further ahead to 2019, earnings are forecast to be weak for the first quarter due to seasonality, but then strengthen as business conditions, particularly in the memory market, improve".

"The prospect of another round of record earnings is dim for now, with [fourth-quarter] earnings projected to fall due to a decline in the price of memory chips as a result of China's rapid expansion of capacity as well as low seasonal demand," said Song Myung-sup, an analyst at HI Investment & Securities in Seoul, in an interview with The Financial Times. "The momentum in Samsung's semiconductor segment will be difficult to sustain over the next two quarters."

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