Samsung to Draw Line Under Lacklustre 2019 With Chip Revival in Store

With Samsung Electronics expecting to face its biggest annual profit decline in at least a decade, investors are relying on the expected edge in the memory-chip market to cure the ailments of tech giants this year.

When it releases preliminary fourth-quarter results on January 8, KRW, the top manufacturer of memory chips used in smartphones, laptops and servers worldwide, posted a 40 per cent slowdown in operating profit of 6.48 trillion ($ 5.56 billion). Is prepared for, according to Definitive Smart, consistently weighted toward more accurate analysts.

The quarter's profits in the three months ended in December are expected to mark the South Korean firm's fifth year-on-year decline in a year of stockpiles of chips squeezing prices and ending in a year, And the US-China trade war plundering global supply chains with prospects for consumer demand.

With 2018 being a record year for earnings, the prospect of last year's recession meant that Samsung posted its biggest percentage drop in annual profit in at least a decade.

But with the United States seeking to suspend December's tariffs on Chinese goods, including mobile phones and laptops, as demand for optimism for the rollout of the new 5G network worldwide has dampened.

"We expect the market to improve in the first quarter of 2020," said Michael Yang, director of IHS Markit. "Both solid demand from server / hyper-scale (infrastructure) customers and optimism surrounding the adoption of 5G smartphones are both drivers of growth."

Reflecting that mood, analysts are quoting Refinitiv SmartEstimate that Samsung's annual profit in 2020 will increase by nearly 40 per cent. The company itself generally does not release full-year earnings estimates.

Despite a difficult time for the chips world of 2019, Samsung still generated half of its January-September profits from the business. With an 8 per cent rise for the Seoul benchmark index, core strength, along with optimism by 2020, helped Samsung's shares ride weak earnings to the end of last year with a 44 per cent gain.

Nevertheless, many industry experts are cautious about the strength of the recovery this year.

Director of S&P Global Ratings, Park Joon-hong, said, "The chip market will rebound from a low base in 2020 last year, but the boom (like) seen in 2017 is expected."

Samsung is also the world's leading manufacturer of mobile phones, TVs, and displays, which cautions. Last week it said there would be a more difficult global economy this year, hurt by rising political uncertainty and a possible drop in consumption.