Samsung has announced that its operating profit likely fell by 56% in the third quarter due to slower demand for memory chips but analysts expect a turnaround in 2020.
South Korean technology Samsung said that it expects its operating profit to decline by 56% from 17.57 trillion Korean won or $14.7 billion to 7.7 trillion Korean won or $6.5 billion for the quarter that ended in September. According to data provider Refinitiv, this was higher than analysts' estimates of 7.1 trillion won.
Consequently, the company expects sales to decrease by 5% to 62 trillion won or $52 billion. Despite the announcements, Samsung shares increased by around 1.7% in South Korea.
The profit decline has been attributed to a slowdown in its memory chip business. However, Daiwa Capital Markets analyst SK Kim said in September that Samsung's advances in extreme ultraviolet lithography would boost demand for its memory chips.
Since the company also manufactures components for rival device manufacturers, analysts at Daishin Securities also expect growth in the company's memory chip and display businesses as Apple and Huawei launch their new flagship phones.
According to Daiwa analysts, Samsung's latest flagship phone, the Galaxy Note 10, would also "positively affect the company's mobile business" for the quarter, due to "a favorable competitive landscape." Huawei, the world's largest telecommunications equipment manufacturer and second biggest seller of smartphones, has been facing challenges due to the US trade blacklist.
Canalys analyst Ben Stanton pointed out: "Samsung has been quick to capitalize on Huawei's [US] problems, working behind the scenes to position itself as a stable alternative in conversations with important retailers and operators." The company's market share in Europe surged to 40%, the highest in five years, following Huawei's debacle.
Daishin analysts forecasts that Samsung will have the advantage as the market prepares for the next generation of ultra-fast wireless technology "as virtually the only 5G smartphone manufacturer in the world outside China."
