Samsung Electronics Forecasts Softer Q4 Profit Decline, Suggesting Global Chip Price Bottom

Samsung's annual profit is likely to be the weakest in four years, but a softer-than-expected fourth quarter decline points to a long-anticipated rebound in global chip markets.
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Samsung Electronics shares posted solid gains Wednesday, contrasting declines in markets around the Asia region, after the world's biggest smartphone and chipmaker forecast stronger-than-expected fourth quarter profits.

Samsung said it sees operating profits for the three months ending in December coming in at 7.1 trillion Korean won ($6 billion), a figure that is down 34% from the same period last year but firmly ahead of the Street consensus forecast of x. Group revenues, Samsung said, are likely to be flat compared to last year at 59 trillion Korean won.

Samsung will post a more detailed fourth quarter update on January 30, but the current estimate suggests annual profits fall 53% to 27.7 trillion Korean won, the steepest decline in ten years and the lowest level since 2015.

"While its 4Q19 revenue  was in-line with our estimates, operating profit beat our estimates driven by cost savings from memory and mobile business, in our view," said Daiwa Capital Markets analyst SK Kim. "We assume the upside was driven mainly by memory and mobile business."

"For mobile, despite the seasonal inventory adjustment and decrease in smartphone shipment in 4Q19 (70m unit shipment, -10% QoQ), we expect improved profitability for mid-end segment along with solid sales for A-series and expanding ODM production," Kim added.

Samsung shares ended the Wednesday session in Seoul 1.8% higher at 56,800 Korean won each, a move that extends the stock's six-month gain to around 26%.