Samsung Electronics braces for profit drop as China slowdown chips away at demand

Samsung Electronics is set to post its first drop in quarterly operating profit in two years as slowing economic growth in China, a key market for the South Korean techology giant, erodes demand for its products.

Bleak results from the world’s top maker of semiconductors and smartphones would add to worries for investors, already on edge after Samsung’s biggest rival Apple this week took the rare step of cutting its sales forecast on slowing iPhone demand in China.

Samsung, due to publish preliminary fourth-quarter results on January 8, is expected to see a 12 per cent year-on-year drop in operating profit to 13.3 trillion won (US$11.85 billion) for the period, I/B/E/S data from Refinitiv shows.

“Depressed demand in China will further drive down Samsung’s chip sales there. And China’s overall smartphone market is stalled and declining, which will affect not only Apple but Samsung,” Song Myung-sup, a senior analyst at HI Investment & Securities, told Reuters.

Revenue is expected to have slipped 5 per cent, hurt by lower memory chip shipments. Samsung had in October slashed its 2018 capital expenditure, calling an end to a two-year bonanza for memory chips as the global smartphone market slowed.