Apple isn’t the only tech juggernaut revising its earnings guidance (opens in new tab) for the most recent financial quarter. Samsung announced that it will do the same due to declining memory demand and dwindling smartphone sales.
The company believes it (opens in new tab) made an operating profit of approximately 10.8 trillion won ($9.67 billion) in the quarter that ended December 2018; that’s about 18 percent less than the 13.2 trillion won ($11.7 billion) analysts had expected. It’s also roughly 29 percent lower than what Samsung reported during the same quarter back in 2017.
Samsung, like Apple, blamed part of the problem on lower-than-expected sales of its latest smartphones. This implies that the problem doesn’t lie with a single company. Instead, it might be time to reconsider the idea that many people will buy a new phone every year. (Or that people who don’t already have smartphones will finally get them.)
But that’s a problem for the smartphone makers—and shareholders in these companies—to ponder. More relevant to you, dear Tom’s Hardware reader, is Samsung’s memory trouble. The company is a major DRAM supplier, and its problems offer a real glimpse at the actual effect declining memory demand has had on the market.
Numerous reports claimed that memory prices would fall throughout 2018 and 2019. Exact numbers varied, with some estimates of a 5 percent decline in 2018 to anywhere between a 10 and 25 percent drop in 2019. The message was clear either way: the high prices memory makers enjoyed during the prolonged shortage were a thing of the past.
Samsung responded to these estimates by announcing that it would decrease memory production in 2019. The company wanted to effectively force memory prices to either remain stable or, in a move that would likely frustrate consumers and please investors, help them rise closer to their previous peaks. Either outcome would be good for Samsung.
But slowing its own production might not be enough for Samsung to control memory pricing. There are many other factors at play, not the least of which being that the U.S. and China are using their memory companies as yet another front in their ongoing trade war. Samsung is South Korean, yes, but the actions of these countries are felt globally.
These problems also come as continued shortages of Intel processors rock multiple segments of the tech industry. Combine that with already-declining PC sales (with the exception of gaming PCs) and it seems like hardly any product category will be spared this apparent course correction.
Reducing memory production in an attempt to increase memory pricing may have a counter-affect of reducing demand as people hold off on otherwise unnecessary upgrades due to cost....it may also further increase smartphone prices, which in turn may help reduce smartphone sales.