Samsung forced to issue profit warning amid falling memory chip prices

The tech company issued a profit warning on Tuesday, warning shareholders that is first quarter results will fall short of expectations due to a collapse in memory chip prices and weaker demand for its display panels.

Samsung issued a profit warning on Tuesday morning, telling shareholders that its first quarter earnings will fall short of the mark, with the company blaming a collapse in memory chip prices and weaker demand for its display panels.

The news came shortly after its US-based rival Apple warned its own shareholders that weakening global economic growth and softer demand for its memory chips, which make up the core of its business, would hurt the company’s earnings in 2019.

Price declines for Samsung memory chips ahead of earnings guidance

Samsung issued its warning to shareholders in a regulatory filing ahead of its earnings guidance which is due next week, with the South Korean tech company telling investors that it ‘expects the scope of price decline in main memory chop products to be larger than expected’.

This is the first time in the company’s history that it has provided comment before its official earnings guidance.

Samsung earnings likely to miss expectations

The company will likely miss its 7.2 trillion won ($6.4 billion) operating profit forecast for the January – March period provided by Refinitiv SmartEstimate, which represents a 50% decline from the 15.6 trillion won the business recorded during the same period a year prior.

Its revenues were also forecast to fall to 53.7 trillion won, down from 60.6 trillion won recorded a year ago, according to Refinitiv.

‘Inventories piling up on its memory chip side and the weak performance of its display panels business due to bad sales of Apple’s iPhones are hurting profitability for Samsung,’ Lee Won-sik, an analyst at Shinyoung Securities told Reuters.

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