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Samsung was tipped to report a drop in operating profit and revenue for Q4 2018, as poor economic conditions in key market China contributed to weakened sales of smartphones and memory chips.

Citing data from financial company Refinitiv, Reuters reported Samsung will reveal a 12 per cent year-on year-drop in operating profit to KRW13.3 trillion ($11.9 billion), its first decline for the metric in two years. Revenue is expected to have slipped 5 per cent.

The company is scheduled to publish its preliminary Q4 results tomorrow (8 January).

China weighs

The declines have been driven by weakened sales in China for smartphones, which has resulted in poor sales of Samsung’s memory chips, reported Reuters.

Major rival Apple last week also slashed its guidance in the wake of weaker-than-expected iPhone sales, with China a major contributing factor.

Refinitiv data showed Samsung’s worldwide smartphone business has also been hit, with profit slumping by a fifth in the fourth quarter.

Apple’s smartphone business is notably more reliant on the Chinese market, where it holds a 9 per cent market share, whereas Samsung has less than 1 per cent.

However, Samsung’s memory and processor chips are a major part of its business, accounting for more than three quarters of its earnings and 38 per cent of overall sales. Its chips also power many of the world’s major smartphones, including those from China’s market leader Huawei.

Breaking out the decline, overall profit for Samsung’s chip business is expected to have dropped by 3.7 per cent year-on-year to KRW10.5 trillion, while memory chip shipments fell 10 per cent on average.

Last month, Reuters reported Samsung plans to close one of its mobile manufacturing facilities in China, as it faced stiff competition from domestic rivals and weaker-than-expected sales of its Galaxy line in the country.

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