The big picture: A combination of falling memory prices, slowing display demand and lagging smartphone sales all contributed to Samsung’s nightmarish guidance. Fortunately, the slump will likely correct itself in the second half of 2019 ahead of the holiday buying season.
In its earnings guidance for the first quarter of 2019, Samsung said it expected consolidated operating profit of approximately 6.2 trillion Korean won (around $5.5 billion), a drop of roughly 60 percent year-over-year. Consolidated sales, meanwhile, are estimated to be 52 trillion Korean won.
Intel’s ongoing supply shortage is linked to declining memory prices. With fewer CPUs in the supply chain, PC OEMs aren’t able to build as many systems as they normally would, meaning they aren’t consuming as much DRAM. This has led to excess inventory, forcing prices down to levels we haven’t seen in years.
Increased competition among rival smartphone makers has slowed Samsung’s own mobile business and the overall cooling of the smartphone industry as a whole means companies that depend on Samsung displays such as Apple aren’t placing as large of orders as they otherwise would. Fierce competition from budget television makers hasn't helped matters, either.
Fortunately for Samsung, the struggles could be short-lived. Kim Yang-jae, an analyst at KTB Investment and Securities, told Reuters that, “In the second half, memory chip prices will have a soft landing, so falls will slow, and the release of new iPhones later seems like a good sign for Samsung’s display and memory chips.”