Samsung Electronics warned on Tuesday that it might report disappointing monetary outcomes due to slumping costs for chips and LCD screens, in one other signal of slowing demand for smartphones and different devices.
The South Korean electronics big mentioned it was anticipating a “widening price fall among major products” for the primary three months of the yr amid “weakening overall demand” for its merchandise. The disclosure was uncommon for Samsung, which generally presents a forecast of its monetary efficiency shortly after the tip of its quarterly interval.
The announcement from one of many workhorses of the buyer electronics business is the newest indication of waning world demand for classy tech merchandise. It comes towards the backdrop of a 7 p.c decline in smartphone shipments globally in the course of the fourth quarter of 2018, the fifth quarterly decline, based on an evaluation by the Hong Kong-based analysis agency Counterpoint.
The change, partially, comes as shoppers maintain on to their smartphones longer, unconvinced of the necessity to improve to new fashions that supply solely incremental technological enhancements.
But Samsung’s announcement additionally factors to a broader world pattern as China’s financial engine has decelerated. Europe has proven indicators of slowing as nicely. In the United States, the place the financial system has expanded for practically a decade, indicators level to a rising risk of recession. Consumers feeling pinched generally hold off on buying new gadgets.
The deceleration has been particularly hard for companies like Apple that have looked to China’s growing middle class for future revenue growth. The company saw its total sales in the region that includes China plummet 25 percent in the fourth quarter of last year, to $13.17 billion.
While Samsung is the world’s largest seller of smartphones — best known for its Galaxy series — the semiconductor business accounts for the bulk of its profit.
Both Samsung and Apple have seen increasingly stiff competition from domestic manufacturers in China, where companies like Huawei and Xiaomi have drawn consumers away from foreign brands with inexpensive, feature-rich phones. Beijing’s industrial policies have also encouraged local manufacturers to expand chip production, which China has identified as a critically important part of its economic strategy.
The policy, along with waning demand, has led to growing stockpiles of chips in other countries throughout the region. Manufacturers in Japan have also reported that warehouses are filling up, as manufacturing capacity has far outstripped anticipated Chinese demand.
In its statement Tuesday, Samsung said it would seek to boost competitiveness by offering more technologically sophisticated products, indicating it would seek to counter the flood of Chinese components into global markets with higher-quality offerings.
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