Samsung Joins Apple in Warning of Gloomy 2016 for Technology

Samsung Joins Apple in Warning of Gloomy 2016 for Technology

access_time2016-01-29 12:46:58

Samsung Electronics Co. warned of slowing demand and economic turbulence after its quarterly earnings missed analysts’ estimates, joining Apple Inc. in foretelling a downbeat 2016 for the technology sector.

The Korean conglomerate, whose quarterly profit fell short of expectations by almost 40 percent, said the deteriorating global economy was eroding demand for computers and smartphones and depressing component prices. Samsung will invest in new screen and semiconductor technologies such as foldable displays to try and boost profit, executives said on a conference call.

Samsung’s warning came days after Apple -- its biggest customer according to data compiled by Bloomberg -- predicted its first sales decline in a decade. Chief Executive Officer Tim Cook said the company was seeing “extreme conditions” unlike anything the world’s largest technology company had ever encountered, with economic growth in China at its weakest pace in 25 years.

Shares of Samsung, the world’s biggest maker of phones, displays and memory chips, finished 2.6 percent lower in Seoul. The stock has fallen more than 9 percent this year, compared with a 2.8 percent decline in the benchmark Kospi index.

The cautionary tones adopted by Apple and Samsung sent ripples through an industry whose fortunes are entwined with the market’s two leading players. Mobile component suppliers TDK Corp., Murata Manufacturing Co. and LG Display Co. slid on Thursday after Apple shares tumbled 6.6 percent.

Alps Electric Co., which Bloomberg-compiled data shows is most closely co-related with Apple, led losers with a decline of 17.4 percent.

Samsung reported net income excluding minority interests fell 39 percent to 3.24 trillion won ($2.7 billion) in the December quarter, lagging the 5.4 trillion-won average of estimates compiled by Bloomberg. That result includes a 2.5 trillion won non-operating loss due to impairment charges, the impact of a stronger Korean won and anemic growth in its key smartphone and chip units.

On Thursday, it said will buy back 2.99 trillion won of stock in the second phase of its buyback program.

Global smartphone shipments rose just 6 percent in the final quarter of 2015 -- the slowest pace of growth on record, according to research firm Strategy Analytics.

Cost controls helped enhance margins even as mobile division sales fell. Operating profit at the unit rose 14 percent to 2.23 trillion won from 1.96 trillion won a year earlier.

Operating income at the chip unit rose just 3.7 percent to 2.8 trillion won. Prices for DDR3 4-gigabyte dynamic random access memory chips averaged $1.93 in the quarter, compared with $3.77 a year earlier, according to data from inSpectrum Inc. 

Samsung said this month that its foundry business received orders from Qualcomm Inc. to make Snapdragon 820 chips. It’s decided to use Qualcomm’s chips for about half of its upcoming S7 devices only a year after turning away from the U.S. company, people with direct knowledge of the matter have said.

Operating income from displays fell 36 percent to 300 billion won while profit at the consumer electronics division, which comprises TVs and home appliances, rose more than fourfold to 820 billion won in the quarter, benefiting from falling panel prices and strong U.S. holiday-quarter demand for 4K televisions.

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