Chip prices rebounded, but Samsungs fourth quarter profit fell more than expected

 Chip prices rebounded, but Samsungs fourth quarter profit fell more than expected

Operating profit fell 34 percent to 7.1 trillion won ($6.1 billion) in the fourth quarter, the worlds largest memory chip maker forecast. Analysts, by contrast, forecast an average profit of 6.49 trillion won ($5.56 billion).

As the biggest factor affecting Samsungs profits, global chip prices have shown signs of getting rid of the long-term downturn, thanks to the easing of trade tensions and the boost of orders from data center operators. Demand for DRAM chips used in smartphones and servers is expected to rise gradually.

Wall Street has always believed that semiconductor demand will recover and expects the computer and smartphone parts market to resume growth in the second half of 2020. In 2019, the semiconductor market was hit hard by a decline in mobile device sales and a slowdown in cloud computing expansion. Meguiar told investors last month that the worst was over for the memory chip industry.

Although the fourth quarter is usually the off-season of sales, NAND prices have improved continuously and DRAMs decline rate has slowed down. The recovery of strong demand from server customers is likely to bring Samsungs inventory back to normal earlier than expected in 2020.

In the fourth quarter of 2019, Samsungs revenue is expected to be 59 trillion won (about 50.6 billion US dollars), lower than the general expectation of 60.9 trillion won (about 52.2 billion US dollars). Samsung did not provide net profit or sector performance data, which is expected to be released when final results are released later this month.

Contract prices for 32GB DRAM server modules fell by about 5.3% in the fourth quarter of 2019, down from 14% in the third quarter, according to inspectrumtech, a market research firm. At the same time, the price of 128gbmlcnand flash memory chips remained stable.

Samsungs share price surged 44% in 2019 on expectations that demand will rise in 2020. CW Chung, head of South Korean Equity Research at Nomura international in Seoul, said the growing shift to 5g wireless technology and cloud computing will drive chip business growth.

Samsung is investing more in the development of flexible OLED panels for smartphones, hoping to maintain its leading position in the mobile display market. But its older LCD business, after facing competition from Chinese suppliers such as BOE, saw panel prices plummet, prompting it to shut down some of its facilities.

Samsungs panel division may also face cost pressures in 2020, but its overall operating profit is expected to increase driven by the increased use of flexible OLEDs, said Lee Su bin, an analyst at Daishin securities, in a report released last December

In terms of mobile devices, Samsung is expected to deliver less smartphones than expected this quarter. But thanks to the launch of the $1980 collapsible smartphone Galaxy fold, the average price of its phones is likely to rise.

Samsung is expected to release its second foldable square cell phone in San Francisco on February 11, and the companys main flagship device, Galaxy S11, may also make its debut at the event. Samsung said its devices accounted for 54% of the global 5g smartphone market by November 2019, with more than 6.7 million Galaxy 5g smartphones shipped last year. (small)

Source: Wang Fengzhi, editor in charge of Netease Technology Report