Samsung’s Alarming Q4 Guidance Raises Concerns

The South Korean tech giant, Samsung Electronics, on Tuesday announced its Q4 earnings guidance. But to the surprise of many, the company confirmed it expects its fourth-quarter earnings to fall sharply owing to factors like insufficient demand in its memory chip business, as well as growing competition in the smartphone segment.

The Company expects an operating profit of approximately 10.8 trillion Korean won ($9.67 billion) for the fourth-quarter, which is already 28.71% down from what it was a year ago and 18.18% less than the analysts’ expectation of 13.2 trillion won.

Factoring in the weakness in the semiconductor market, the expected average was already significantly lower than Samsung’s third-quarter operating profit of 17.57 trillion won and below the 14.87 trillion procured in the June quarter.

Further, the company also confirmed that it expects its consolidated Q4 sales to fall significantly citing challenging market scenario. Samsung expects its consolidated sales for the fourth-quarter to be around 59 trillion won, ~10.57% down from what it was a year ago, compared to analysts’ expectation of 62.8 trillion won.

According to the chipmaker, weaker-than-expected demand for memory chips from data center customers resulted in a decline in the number of shipments and a considerable drop in memory chip prices, which in turn impacted profitability. The company further added that increasing marketing expenses and flat sales volumes are the other factors which dented the company’s profitability.