Samsung Electronics sees gradual chip rebound in 2020 after fourth-quarter profit plunge

Samsung Electronics Co Ltd said on Thursday it expects earnings to bounce back in 2020 after a fourth-quarter slump, helped by a gradual recovery in memory chip demand from data centre customers and 5G smartphone makers. The cautiously optimistic outlook from the world`s biggest memory chip and smartphone maker draws a line under its worst year since 2015. It also echoes positive guidance from peers like Intel Corp and TSMC, signalling a rebound in chip prices after a lengthy slide.

The South Korean conglomerate reported operating profit of 7.16 trillion won (4.7 billion pounds), down 34% and in line with its own previous estimate. Net profit fell 38% to 5.2 trillion won, with revenue easing 1% to 59.9 trillion won - also meeting estimates.

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"Looking ahead to 2020, Samsung expects improvements in overall business performance but also sees continued uncertainties in the global business environment," Samsung said in a statement. It didn`t identify particular issues that could affect its operations.

The United States and China reached an initial deal late last year to resolve a long-running trade row that had disrupted global business, though some issues remain unresolved. Samsung rival Apple Inc earlier this week used a wider-than-normal prediction range for a revenue forecast citing uncertainty created by the coronavirus outbreak in China which economists fear could hurt the global economy.

For first-quarter 2020, Samsung said it expected earnings to fall reflecting low seasonal demand.

Fourth-quarter operating profit more than halved to 3.45 trillion won in Samsung`s mainstay chip division, while mobile division profit improved nearly 67% to 2.52 trillion won.

Samsung said the pace of 5G smartphone expansion and its effects should be monitored closely, but the company sees demand picking up around mass-market models as major manufacturers expand their 5G lineups.

Shares fell 1.4% by 0125 GMT, trailing the wider market`s 0.6% drop. Samsung shares rallied 44% last year, as expectations of an easing of U.S.-China trade tensions fuelled hope of a rebound in the chip industry.