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Samsung Electronics flags profit drop on weak chip demand

SEOUL (Reuters) – the South Korean Samsung Electronics Co Ltd on Tuesday estimated 29 percent drop in quarterly operating profit, the first decline in two years, because the marked, rugged memory chip and mobile phone markets, in a rare comment.

The logo of Samsung Electronics is seen at its office in Seoul, South Korea January 7, 2019. REUTERS/Kim Hong-Ji

Weaker earnings at the world’s biggest maker of smartphones and semiconductors added to concerns for investors already on edge after Apple Inc. last week took the rare move of lowering its quarterly sales forecast, citing a poor iPhone sales in China.

Samsung, in a regulatory filing, the estimated earnings at 10.8 trillion won ($9.67 billion) for October-December last year, down 29 percent compared to the same period a year earlier. That, in comparison with the 13.2 trillion won average of 26 analyst estimates in I/B/E/S Refinitiv poll.

Also, an estimated 11 percent on-year drop in sales at 59 trillion won.

The company is usually not explain the details behind the estimates, but on Tuesday issued a background statement, along with its fourth-quarter earnings guidance to “ease confusion among investors, as his estimate was far below the expectations.

“We expect that the profit is limited in the first quarter of 2019 due to the difficult conditions for the memory business,” he said.

Samsung unveil detailed earnings later in January.

Analysts expect Samsung’s profit to decrease by 2019 as a slowing Chinese economy affect the demand for its chips and mobile phones.

(IMAGE: Memory prices are on their way down – tmsnrt.rs/2GZzcil)

Prices for DRAM chips, devices with temporary workspaces and allow them to multi-task, decreased from 10 percent in the fourth quarter, according to industry tracker DRAMeXchange.

The prices of NAND flash memory chips, which hold data permanently, slid 15 percent.

DRAMeXchange expects memory chip prices to fall 10 percent on average in the first quarter of 2019.

(For an interactive graphic memory chip prices, click tmsnrt.rs/2GYDer8)

Reporting by Heekyong and Yang Ju-min Park; Editing by Christopher Cushing

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