As Samsung Electronics is expected to suffer its biggest annual profit decline in at least a decade, investors are counting on an expected rebound in the memory chip market to boost samsung’s performance this year. Samsung Electronics, the world’s largest memory chip maker, will release its preliminary results for the fourth quarter of 2019 on January 8. Samsung Electronics’ fourth-quarter operating profit is expected to plunge 40 percent to 6.48 trillion won ($5.56 billion), according to financial research firm Refinitiv SmartEstimate.
That means Samsung Electronics’ quarterly profit is expected to fall for the fifth time year-on-year. With record profits in 2018, the downturn in 2019 could mean the biggest annual profit decline for Samsung in at least a decade.
Nevertheless, as the outlook for international trade improves and optimism grows to launch 5G networks around the world, market demand concerns will ease.
“We expect the market to recover overall in the first quarter of 2020,” said Michael Yang, executive at research firm IHS Markit. Strong demand expectations from server/hyper-scale (infrastructure) customers, as well as optimism about the adoption of 5G smartphones, are drivers of growth. ”
That’s why analysts surveyed by Refinitiv SmartEstimate on average expect Samsung’s annual profits to surge by nearly 40 percent in 2020.
Despite the difficulties in the chip industry in 2019, half of Samsung Electronics’ profits in the first three quarters came from the business. This core advantage, combined with optimism about 2020, helped Samsung’s share price rise 44 per cent by the end of 2019, compared with an 8 per cent rise in Seoul’s benchmark index.
Still, many industry experts are wary of the strength of this year’s recovery. “The chip market will rebound from last year’s low base in 2020, but it is too early to expect the same magnitude as in 2017,” said Park Jun-Hong, global rating executive at Standard and Poor’s. “