Samsung feels Apple’s pain as technology slowdown hits sales

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Samsung, the world's biggest producer of semiconductors and smartphones, expects to post its first quarterly profit drop in two years as slowing sales in China weigh on earnings prospects, Reuters reports.

It was now expecting to report operating profit of 10.8tn Korean won (£7.5bn) for the fourth quarter of 2018, down 29% on a year earlier and missing analysts' expectation of 13.2tn won (£9.2bn).

After Apple, Samsung today reported that it likely won't be able to reach the originally estimated profit for Q4 ending on December 31st 2018. -China trade war, an associated slowdown in the Chinese economy, increasing competition in the phone market from emerging players like Huawei, and the fact that Apple products are prohibitively priced for some global markets. The drop is mainly due to poor performance of its chip business. It expects fourth-quarter sales to drop nearly 11 per cent from a year ago, to 59 trillion won ($52.4 billion).

Shares of Samsung Electronics slipped 1.7 percent to end at 38,100 won on Tuesday, underperforming the broader market's 0.6 percent fall.

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The firm had seen earnings surge in recent years largely due to strong appetite for memory chips in mobile devices. "While we anticipated some challenges in key emerging markets", reads a letter from Cook to investors, "we did not foresee the magnitude of the economic deceleration, particularly in Greater China".

Analysts say that Apple's woes and Samsung's are indicative of tougher times ahead for global businesses, as dismal growth in the world's second-largest economy, exacerbated by a long China-U.S. trade war, takes a toll. Samsung did not provide net income, which it is to do later this month when it releases final results.

In a short press release, Samsung said the expected consolidated sales are approximately KRW59 trillion, while the operating profit should be around KRW10.8 trillion. The memory chip business was also hit by a drop in prices, the company said. Whether or not it's for precisely the same reasons is unclear, but it seems a plateauing smartphone market is at least partially to blame for all three companies' guidance misses.

Profitability is to recover in the second half on projected improvements in the market, with rising adoption of new central processing units and launches of new smartphone products, it added.