Samsung predicts fourth-quarter decline in profits due to weak demand and growing competition

A South Korean flag, left, and Samsung Electronics flag fly outside the company’s headquarters in Seoul, South Korea, on July 5, 2019.

Jean Chung | Bloomberg | Getty Images

SINGAPORE — Samsung Electronics on Thursday said it expects a decline in profit in the three months that will end on Dec. 31 due to weak memory chip demand and intense competition in the smartphone and consumer electronics.

The world’s top smartphone maker announced a 59% year-on-year jump in operating profit to 12.35 trillion Korean won (about $10.89 billion) for the July-September quarter, which was in line with earlier guidance. Samsung said it was partly due to a boost in demand for smartphones and consumer electronics — sale of smartphones, including new flagship models like the Galaxy Note20, saw a near 50% jump in sales.

Samsung shares fell 1.19% in early trade, tracking the overall decline in the South Korean market where the Kospi index was down 1.27%.

“Looking ahead, Samsung Electronics expects profit to decline in the fourth quarter amid weakening memory chip demand from server customers and intensifying competition in mobile phones and consumer electronics,” the company said in a statement.

Low prices for memory chips used by servers in data centers are likely to weigh on the main profit-making semiconductor business in the last three months of 2020. Demand for chips used in smartphones, personal computers and graphics processing units, used for gaming consoles and PCs, is predicted to rise, Samsung said.

The mobile business will potentially see smartphone sales decline, according to the South Korean tech giant. But the displays unit, which counts Apple as a customer, is set to see a significant rise in mobile panel sales from the third quarter due to new smartphone launches.

For next year, Samsung predicted a recovery in overall global demand but said uncertainties will remain over the coronavirus pandemic.

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