South Korean tech giant Samsung Electronics Co Ltd estimated on Friday earnings grew at the slowest pace in more than a year in the second quarter, as analysts said weak smartphone sales likely offset record high chip earnings.
Samsung shares fell 2 per cent as the guidance gave investors insight into how badly the decline in smartphone profitability is hurting the company’s bottom line, after it warned in April of an earnings slowdown amid tougher competition.
The world’s biggest maker of memory chips, smartphones and TVs said April-June operating profit would grow 5.2 per cent to 14.8 trillion Korean won ($13.2 billion), just missing an average estimate of 14.9 trillion won from 18 analysts polled by Thomson Reuters.
While the chip business would post its seventh consecutive record quarterly profit, analysts say, lacklustre smartphone earnings growth fuelled concerns the mobile business is running out of ideas to underpin sales of its premium Galaxy devices.
“It is going to be tough. The smartphone market is not growing anymore but the competition is intensifying,” said Lee Won-sik, an analyst at Shinyoung Securities.
Samsung shares are down about 12 per cent this year on concerns over slowing profit growth and a lack of technological innovation to drive smartphone sales.
New monthly data released on Thursday by mobile phone market tracker Counterpoint Research highlighted Samsung’s problems, showing its latest Galaxy 9 Plus premium handset had been overtaken by Apple Inc’s iPhone 8 as the world’s top-selling smartphone due to weak sales in Europe.Competition from cheaper Chinese brands like Xiaomi Corp and Huawei have already seen Samsung lose market share in China and India, the world’s top smartphone markets.
Overall sales likely fell 4.9 per cent from a year earlier to 58 trillion won, Samsung said, versus analysts’ average forecast of 59.7 trillion won. The firm did not elaborate and will release detailed earnings in late July.
The outlook for chips remains upbeat, with production of Apple’s next iPhone likely to support NAND flash memory prices after they fell by up to 15 per cent in the second quarter, according to chip price tracker DRAMeXchange.