Samsung offers glimpse of 2016's tech slowdown

Catcher Technology Co

08/01/2016 06:33

(The author is a Reuters Breakingviews columnist. The opinions 
expressed are her own.) 
    By Robyn Mak 
    HONG KONG, Jan 8 (Reuters Breakingviews) - Samsung's 
 005930.KS  disappointing year-end is a preview of this year's 
tech slowdown. The world's largest smartphone and memory group 
said on Jan. 8 that operating profit for the fourth quarter was 
6.1 trillion won ($5.1 billion), below expectations. Weaker 
demand for its gadgets is a likely factor. But Samsung also 
faces falling prices and overcapacity in chips and television 
displays. 
    The South Korean $162 billion tech behemoth is already 
feeling the chill from the slowdown in demand for smartphones. 
Though it likely shipped the same number of handsets in 2015 as 
in the previous year, lower prices could drag operating profit 
in the division down by 30 percent, according to analysts at BNP 
Paribas. 
    The smartphone slowdown has an even bigger impact on other 
parts of Samsung. The group's high-margin semiconductor 
business, which makes wafers for the likes of Apple  AAPL.O , is 
expected to stagnate this year as growth in the market for 
mobile gadgets slows to single digits. Another headache is a 
steep decline in memory chip prices - a major component of 
Samsung's semiconductor unit. Gartner estimates that the global 
dynamic random-access memory market shrank 2.4 percent in 2015. 
It was up 32 percent the previous year. 
    Meanwhile a glut of cheap Chinese liquid crystal display 
panels has crushed global prices: BNP Paribas reckons Samsung's 
display unit will make a loss in the first half of 2016. Global 
shipments of televisions have been steadily declining. 
    Investors have already knocked off over 7 percent in 
Samsung's shares in the past month. Yet shareholders can take 
some comfort that the group's size and diversity equip it to 
weather the slowdown. Shares in mid-sized component makers, like 
Taiwan's Catcher Technology  2474.TW  and Pegatron  4938.TW  
have fallen more than 20 percent in a month on reports that 
Apple will slash iPhone production. Though Samsung is facing 
headwinds, 2016 looks like a tough year for all.   
        
    On Twitter https://twitter.com/mak_robyn.  
     
    CONTEXT NEWS 
    - Samsung Electronics' operating profit for the fourth 
quarter of 2015 likely rose 15 percent year on year to 6.1 
trillion won ($5.10 billion), the South Korean group said on 
Jan. 8. The figure was below the 6.6 trillion won estimated by 
analysts polled by Thomson Reuters. 
    - The company said it expected revenue in the quarter to 
rise 0.5 percent year on year to 53 trillion won. 
    - Samsung did not give further details about its business 
units, which range from smartphones to semiconductors to display 
panels. It will disclose full results in late January. 
    - Shares of Samsung were up 0.7 percent to 1,172,000 won by 
noon South Korea time on Jan. 8. 
    - Graphic: Samsung earnings: http://link.reuters.com/duz83w 
    - Reuters: Samsung Elec Q4 guidance underscores tech sector 
headwinds  urn:newsml:reuters.com:*:nL3N14R5VP 
     
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    - For previous columns by the author, Reuters customers can 
click on  MAK/    
 
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 (Editing by Peter Thal Larsen and Katrina Hamlin) 
 ((robyn.mak@thomsonreuters.com;)(Reuters Messaging: 
robyn.mak.thomsonreuters.com@reuters.net)) 
 
Keywords: SAMSUNG ELEC RESULTS/BREAKINGVIEWS