Samsung Electronics expects the sharpest decline in annual profits in over a decade

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Updated on Mar 11, 2020

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2019 is likely to mark the sharpest decline in annual profits for Samsung in over a decade.
According to Refinitiv's forecast, Samsung's operating profit will drop to $5.56 billion in Q4.
Analysts blame the U.S - China trade war to have weighed on the chip market in 2019.
Samsung gained 45% in the stock market in 2019 amidst the falling demand for chips.
Analysts remain cautious of Samsung's recovery in 2020.

As per the forecast, 2019 is likely to mark the sharpest decline in annual profits for Samsung Electronics in over a decade. As such, investors are now interested in seeing if the market for memory chips can catch steam and offset Samsung’s annual loss.

Samsung is expected to announce its fourth-quarter report on January 8^th. According to Refinitiv SmartEstimate, the company is likely to see its operating profit decline to $5.56 billion that marks a massive 40% drop for the largest memory chips manufacturer of the world. Refinitiv SmartEstimate primarily covers analysts that are known to be more consistent in their forecasts.

Analysts Blame The U.S – China Trade War To Have Weighed On The Chip Market

In an event that the forecast comes true, the fourth-quarter will mark the 5^th year over year drop in quarterly profit for the South Korean company. According to the experts, the ongoing U.S – China trade war weighed on the chips market in 2019 that may contribute the most in Samsung’s poor Q4 results.

On the other hand, however, with the U.S – China trade war easing off in the past couple of weeks with the Trump administration having announced that tariffs on a large number of Chinese products including laptops and mobile phones are likely to be reduced in the upcoming weeks, analysts and investors are now seeing a silver lining for the company to see a rising demand in 2020. With the worldwide 5G network set to be launched in various regions, the demand for Samsung’s new devices is likely to be further enhanced.

The U.S had also canceled the planned increase in tariffs on Chinese goods on December 15^th.

Samsung Noted A 45% Growth In The Stock Market In 2019 Despite The Falling Demand

Despite the last year posing a challenge for the chip market, Samsung was able to generate reasonable revenue from its chip business. Combined with other segments, the company was able to keep its strength in the stock market with an around 45% gain in 2019. The stock opened the year at around 38,000 KRW in January 2019 and ended it at around 56,000 KRW in December.

Despite the rising optimism, analysts recommend caution and are not too confident in judging the extent to which Samsung will be able to recover in 2020. The company itself mirrors the same opinion, highlighting uncertainty in the outlook for 2020. The company also cites the rising geopolitical complications and the global economic slowdown to weight on the overall performance in 2020.