Samsung Electronics recorded its highest profits in the last quarter, but three months on, things aren’t looking as great. The company issued guidance today. It warned that revenue and profits for the three months ending December 31st, 2018 will be going down year-on-year.
Samsung is expecting sales of about $52.5 billion. The operating profit is set to drop 29 percent to about $9.6 billion.
LG Electronics followed suit, saying that it expected its fourth-quarter operating profit to drop 80 percent from the same period a year earlier, far below expectations.
The forecast for LG and Samsung surprised everyone. The analysts of Samsung were expecting 13.2 trillion won of operating profit from 62.8 trillion in revenue. Samsung usually waits for the full earnings release before remarking on its performance throughout the year. LG did not offer any explanation for the downward guidance.
The two main factors in Samsung’s poor performance are identified as “lackluster demand in the memory business.” And “intensifying competition in the smartphone business.” Memory shipments are said to have declined due to unforeseen inventory adjustments from Samsung’s data center customers. The company says it spent more on smartphone marketing in the face of flat sales and strong seasonality.
Plateauing Smartphone Demand
LG, Samsung, and Apple, all of them are suffering from plateauing smartphone demand. Apple called out China specifically as a major factor. Samsung has faced intense competition in the market likes of Huawei and Xiaomi.
Furthermore, we have to patiently wait for the full earnings to release, later in the year. And then we will find out more specific financial details.