Samsung Posts Lower Profit, Anticipates End of Chip Slump

By Eun-Young Jeong 

SEOUL -- Samsung Electronics Co. reported a 38.5% decline in fourth-quarter net profit though projected improved market conditions in 2020, as the chip industry starts to pull out of a protracted slump.

The South Korean tech giant reported a quarterly net profit of 5.2 trillion won ($4.4 billion) for the last three months of 2019, versus 8.46 trillion won the prior year. But the net profit slide was less dramatic than Samsung's third-quarter year-over-year dip of 52%.

Samsung, the world's largest memory-chip maker, posted revenue of 59.9 trillion won, a 1.06% increase from the previous year.

Earlier this month, Samsung forecast results that beat analysts' estimates, which had been weighed down over the past year by a semiconductor glut and the U.S.-China trade fight. Since then, other chip makers, including Intel Corp. and Taiwan Semiconductor Manufacturing Co., the world's largest contract semiconductor maker, have delivered robust results and forecasts, elevating hope that 2020 will be a return to better days.

Samsung, based in Suwon, South Korea, has also been shielded somewhat from Trump administration restrictions that have blocked U.S. business with China's Huawei Technologies Co., which have hurt some American firms. On Tuesday, U.S. chip maker Xilinx Inc. said it planned to cut about 7% of its workforce, pointing to lost business with Huawei and lax 5G adoption.

Samsung weathered challenges in 2019 from a global slump in memory-chip demand that followed a string of record-breaking profits in the preceding years. The company's net profit bottomed out in the first quarter of 2019, reaching its lowest point since 2016's global recall of Galaxy Note 7 smartphones. Operating profit in 2019 nearly halved from its peak in 2018.

The company, which generated about 75% of operating profits from semiconductors in 2018, started showing signs of a rebound in the second half of 2019, backed by rising prices of memory chips and better-than-expected smartphone sales.

Investors had bet on a turnaround earlier than that. In 2019, Samsung shares rose 44%, alongside rivals Micron Technology Co. and SK Hynix Inc. Shares of Samsung continued to hit record highs this month after the company reported preliminary results for the fourth quarter.

Samsung, the world's largest smartphone maker, is unveiling a new lineup of high-end devices next month, and a bigger consumer embrace of 5G handsets could help boost sales. Huawei and Samsung are the top 5G phone vendors, accounting for nearly three-quarters of the 18.7 million 5G devices shipped out in 2019, according to Strategy Analytics, a market researcher.

Write to Eun-Young Jeong at [e-mail]

(END) Dow Jones Newswires

January 29, 2020 20:32 ET (01:32 GMT)

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