Samsung’s Turnover Could Have Started, Say Analysts, Though Profits Still Flag

South Korean electronics conglomerate Samsung said that a turnaround for the company has already taken place even though its profits are still flagging.

In the quarter that ended in December, the operating profits for the company was at 7.2 trillion Korean won ($6 billion) which was 34 per cent lower than the same period a year ago, the tech giant reported on Thursday. The result was however in line with the forecast of the company made earlier this month.

There was however a 1 per cent growth in sale at almost 60 trillion Korean won ($50.5 billion) which comfortably beat market expectations of a drop of 4.4 per cent.

“The continued fall in memory chip prices” and the slow demand display panels were cited as the reasons for the latest profit drop of the company. The flagging price of chip has dogged the company and the industry at large since the last one year.

An oversupply in the market over the last one year has resulted in a drop in the prices of the memory chips around the world. Analysts however anticipate a stabilization of the global supply in 2020 which is expected to shore up prices.

However some weak sales is expected for a while, Samsung said on Thursday, especially in the area of memory chips, display panels and consumer electronics because of the seasonal fal in demand in the first quarter of every year traditionally.

2020 however could be a good year for Samsung on the overall. A general pickup across its business in 2020 is being anticipated it, Samsung said. The company pointed out that the “increasing demand from data center companies” for memory chips and the expansion in the adoption of 5G enabled smartphones will bring around this expected improvement in 2020.

In the latest reported quarter, there was also an upswing for its mobile unit, the conglomerate said and added that this was “thanks to solid sales of flagship Galaxy smartphones” as well as some measures that it had made to make the larger smartphone lineup more profitable.

According to analysts at Counterpoint Research, too many smartphone models were sold by Samsung which typically left the customers confused. That problem was addressed by Samsung by simplifying its lineup in 2019, the company said last fall.

Mo Jia, a research analyst at Canalys, said Samsung also “drastically increased its portfolio and slashed operating margin” to fend off competition from Huawei last year. It is no secret that the Chinese tech company openly expressed its ambitions to leave Samsung behind as the largest seller of smartphones in the world.

“But the battle never came,” Mo Jia wrote in a Thursday report while mentioning Huawei being placed in a black list of the United States last May which struck a blow to the foreign business of the world.

According to Canalys, in 2019, Samsung not only managed to retain but also extend its position as the leader in the global smartphone market with a 21.8 per cent share of all shipments. Huawei was second while Apple was placed third with market shares of 17.6 per cent and 14.5 per cent respectively.

(Adapted from CNN.com)

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