Samsung Electronics (SSNLF) slipped lower Friday after the group unveiled a record third quarter profit forecast amid concerns that its price levels in its core semiconductor business will likely lead weaker earnings in the months ahead.
Samsung traditionally guides investors into its quarterly earnings release with a sketch of its expectations for profit and sales for the three month period. Samsung said Friday that it sees operating earnings for the three months ending in September to rise 20% to around 17 trillion Korean won, or $15.5 billion, as sales rise 4.8% to 65 trillion.
Samsung shares were marked 0.22% lower on the session by the close of trading in Seoul at 44,700 won each, a move that extends their year-to-date decline past 12%.
One of the biggest investor concerns for Samsung remains pricing in the global semiconductor market, where the company gets around 80% of its revenues, and the oversupply of NAND and DRAM chips that drive data centers and mobile phones.
Micron Technology MU, a Boise, Idaho-based chipmaker that gets around 75% of its revenues from the sale of DRAM chips, has fallen nearly 23% over the past three months amid concerns that pricing power will diminish as the so-called 'super cycle' in semiconductors begins to wane.
"Memory downturns usually last for several quarters and can see an acceleration in price declines, as customers delay procurement to wait for lower prices when possible, causing a snowballing effect," Goldman Sachs' Mark Delaney said in a recent client note. "That can lead downturns to be worse than initially anticipated by investors."
That view was supported by data from TrendForce, an industry tracking group, which estimated that "the contract prices of PC DRAM products will drop by around 2% quarter over quarter in 4Q18 as the market gradually shifts into oversupply."
"However, it is now possible that the price decline will become larger due the shortage of Intel ( INTC) CPUs and lower demand for notebooks and PC DRAM in a row," the report noted.
Samsung's smartphone business is also facing stern challenges from both low-cost China-made rivals and the renewed focus on Asia sames from Apple Inc. ( APPL) .
Samsung CEO DJ Koh has said he'll bring cutting-edge technologies to the Galaxy A mid-range phone line later this year, including a potentially foldabble smartphone, with details about the device possibly released at Samsung's November developers conference.
Research firm IDC estimates Samsung's smartphone unit share fell to 20.9% in Q2 from 22.9% a year ago, and that its shipments fell 10.4% to 71.5 million. It also estimates China's Huawei, Xiaomi and Oppo collectively saw their share rise to 33.7% from 25.2%.
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