The South Korean company reported preliminary operating income dropped to 10.8 trillion won (US$9.65 billion) for the period that ended in December, missing the average analyst estimate compiled by Bloomberg by 22 per cent.
In a statement on Tuesday, the firm cited lacklustre demand and rising competition for its darkening outlook. The company also wanred that challenging business conditions in the memory chip segment would likely mean that earnings would also be below expected levels for the first quarter of 2019.
"The global data center servers temporarily suspended their DRAM purchases, and demand for new IT products in China and emerging markets fell below the market expectation", Lee Jae-yoon, an analyst at Yuanta Securities, said.
Last week, Apple warned that its sales have been slowing, blaming economic weakness in China.
Earlier this month, tech giant Apple posted quarterly revenue projections of just $84 billion, much lower than its previous projections of $89 to 94 billion, setting off a "flash crash" in global currency markets.
But Samsung may have to reduce its chip production capacity if it is to achieve a recovery in the second half, they added, considering the pressure the company and its smaller rival SK hynix face to cut chip prices. But its memory and processor chips, which account for over three-quarters of its earnings and about 38 percent of sales, power smartphones including those from China's top player Huawei.
Samsung has a few things to look forward to, though: Next year, the company should finally launch its first foldable phone, which might (operating word: might) stir things up a little.
Smartphone vendors shipped 355.2 million units during the third quarter of 2018, resulting in a year-on-year decline of 6 per cent, according to Massachusetts-based International Data Corporation (IDC). "In the second quarter Samsung launches the Galaxy S10 and a lot of other Android makers announce new model launches that might help smartphone demand and enhance the demand for DRAM".
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