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Samsung Phones It In

Samsung reported a drop in profits

Image source: artmakerbit, Zeynep Demir - Shutterstock

What's going on?

Samsung Electronics, the world’s biggest seller of smartphones, revealed another consecutive quarter of declining profit on Friday (tweet this). The Korean company announced that its first-quarter profit will likely be less than half what it was a year ago.

What does this mean?

Déjà vu: it happens when they change something. Back in January, Samsung also warned of lower-than-expected fourth-quarter profit – its issues partly mirroring rival Apple’s by way of lower Chinese demand for its smartphones. Not too long ago, Samsung also did a roaring trade selling memory chips for computers and smartphones, and display electronics including flexible screens – but demand for these has stalled too. So Samsung’s estimating that its first-quarter profit will be 60% lower than last year’s as a result.

Why should I care?

For markets: The chips are down, for now.

Samsung’s stock fell a little on Friday: analysts were already expecting a first-quarter profit decline after the company’s fourth-quarter profit drop and initial warning, but Samsung’s own forecast was lower than the average of those estimates. Still, most analysts – and some companies, Samsung included – expect demand for memory chips to pick back up in the second half of the year. There’s likely an element of seasonality about demand for them: Apple’s expected to launch new iPhones in September, and Google a new family of Pixel smartphones in October. Rising smartphone tides should lift several supplier boats.

For you personally: New tech’s a thin silver lining.

On Friday, Samsung also released the world’s first 5G smartphone available for purchase in South Korea, where 5G connectivity is already ubiquitous. It won’t be long before 5G-enabled smartphones hit the market elsewhere, but the infrastructure’s got to catch up first. In the UK, for instance, Vodafone’s 5G plans have been slowed thanks to its decision to stop using Huawei’s equipment following spying allegations. And in the US, expensive 5G infrastructure installation costs and high competition are weighing on profits at telecoms companies.

Originally posted as part of the Finimize daily email.

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