Industry watchers cited by Reuters expect Samsung Electronics' Q4 2019 operating profits to have declined by a whopping 40% to $5.56 billion due to weak memory chip sales. Some analysts suspect that the company could post its biggest annual drop in profit over the last decade, but the good news is that Samsung Electronics is expected to recover this year and have a strong first quarter.
Interestingly enough, Refinitiv SmartEstimate analysts suspect that Samsung's annual profit will increase by nearly 40% throughout 2020. This positive outcome would be driven by increased sales of 5G smartphones and demand for server infrastructures from enterprise customers. And with the chip market expected to stabilize this year, industry watchers are faithful that Samsung will perform better in 2020.
Samsung tackled 2019's chip market's decline with grace
2019 was a tough year for the chip business as a whole. An oversupply coupled with weaker demand and the U.S.-China trade war has made it difficult for chipmakers to maintain a positive trajectory. Despite all of this, half of Samsung's profit in the first three quarters of 2019 was generated by its chip business. This has allowed the company to increase the value of its shares by 44% by the end of the year, in spite of the hurdles it had to face.
2020 is expected to be different and ‘the chip market will rebound […] from a low base last year‘ according to S&P Global Ratings director, Park Jun-hong. He adds that the market is unlikely to boom as it did in 2017 when Samsung dethroned Intel as the world's largest chipmaker, but it will begin to recover. Since Samsung is a key player in this segment, it is bound to benefit from the market stabilizing. Operating profits throughout the coming quarters could look very positive.
Then again, Samsung also expects overall sales of consumer electronics to possibly decline this year as the global economy could prove to be more difficult to tackle in 2020, partly because of rising political uncertainty. Nevertheless, it sounds like the worst is behind us and 2020 will be the year when Samsung will begin to recover some of the losses it recorded in 2019.
