Samsung Electronics has reported its worst operating profit drop in more than four years following plummeting memory card prices and slowing smartphone sales.
After issuing a rare warning last month that its profit report would be short of estimates, Samsung's preliminary results, released on April 5, showed that operating income fell 60% to around $5.5bn in 1Q19, marking the biggest decline since 3Q14.
Sales in smartphones have been slowing significantly over the past year. CCS Insight predicted that just 1.8 billion smartphones would be sold globally in 2019, a revised estimate from its previous prediction of 2 billion. The decreased demand has hit Samsung particularly hard as it has not only led to the South Korean firm struggling to sell its own stock but also affected its secondary business of supplying display and memory cards to tech giant's such as Apple.
Lower demand also led to a significant drop in the number of hyperscale buyers of DRAM and NAND memory cards as they used up their inventory, pushing prices down and affecting Samsung's bottom line once more.
However, many estimates suggest that the profit slowdown will be temporary.
"We do expect server DRAM demand to pick up as well as the S10 sales and foldable-phone sales to be better than expected going into the second half," Daniel Yoo, global strategist at Kiwoom Securities, told Bloomberg TV. "Therefore, the earnings pickup should lead the share price going into the future."