Samsung Set Adrift

Samsung Set Adrift

about 1 year ago2 mins

Mentioned in story

Samsung Electronics reported some disastrous preliminary results on Friday.

What does this mean?

The due date for Samsung’s full quarterly results falls at the end of the month, but the firm likes to give investors a little sneak peek beforehand – and this time, the teaser wasn’t very appealing. Turns out the economic slowdown is hitting demand for electronics and chips harder than the firm expected, with consumers watching their wallets and corporate buyers working through the stock they’ve got piled in the storeroom. And to top it all off, Apple – one of Samsung's biggest chip buyers – was hit by a spate of production delays last quarter, producing gizmos at a snail’s pace during the crucial festive rush. The end result: Samsung's operating profit took a serious nosedive, plummeting a whopping 69% last quarter to mark a dire eight-year low.

Samsung profit

Why should I care?

Zooming in: High-tech hubris.

Samsung isn’t just a victim of circumstance here. Many competitors took note of the glut in the memory-chip market and slashed production, but Samsung just had to be different: the Korean colossus actually upped output by 10% last quarter, in a madcap bid to boost its market share amid the general downturn hubbub. But all that tack seemed to do was tank Samsung’s average selling prices, and that’s got analysts thinking the firm will have to do a 180. After all, the goliath’s offerings are now for sale at close to their cost of production – and if they slip further, the firm could see its first quarterly chip loss since the days of the financial crisis.

The bigger picture: Oil of ill omen.

Samsung’s home country South Korea is a big dog in the worlds of tech and refined oil, and that means the nation’s also a handy barometer for global demand. And prospects aren’t great: recent data showed the country’s imports pipped exports to the post for the first time in 14 years in December.

South Korea trade deficit
Source: Bloomberg
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