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Samsung Expects Its Operating Profit to Plunge for a Change

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Jan. 9 2019, Updated 12:03 p.m. ET

Samsung expects its operating profit to fall 29% YoY

It’s been coming. Global shipment growth has been sluggish for years now and is currently on the decline. The fourth quarter of 2018 was all about the weak demand for Apple’s latest flagships.

Now, South Korean giant Samsung (SSNLF) is expecting its fourth-quarter operating profit to fall 29% YoY (year-over-year) to 10.8 trillion South Korean won ($9.8 billion).

This weakness comes after Samsung posted a string of record profits in the last several quarters. The company has blamed weak demand for memory chips—which have propelled its profits all these years—along with fierce competition in the smartphone space.

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The smartphone industry is poised to have another tough year

As we mentioned earlier, increasing smartphone prices and falling upgrade rates have choked growth in the industry. Additionally, in countries such as China and India, Samsung faces stiff competition from Chinese companies such as Xiaomi, which produce value-for-money handsets, eating away Samsung’s market share.

Another factor that has hit the electronics giant’s bottom line is the falling prices of dynamic random-access memory chips. The surging prices of these chips caused the company’s operating profits to swell in recent years.

Smartphone markets are likely to face more headwinds in 2019 given the looming likelihood of a global slowdown. Lower disposable income could potentially further reduce the smartphone upgrade rate.

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