Net income fell to 8.3 trillion won (US$7.5 billion) in the three months ended December, the Suwon, South Korea-based company said Thursday in a filing.
That compares with the 10.2 trillion won average of estimates compiled by Bloomberg.
Falling demand for memory chips, sliding sales of smartphones and worsening profitability in the display division contributed to the results, according to Samsung.
While the figures underscore the impact of a global economic slowdown and US-China trade tensions, Samsung is trimming back capital expenditures to bring costs under control.
“There’s a tug of war taking place between Samsung and its customers in the chip market.
Clients are waiting to see much further prices will fall before they’ll start buying again and Samsung is trying to control supplies to keep prices from falling too sharply,” said Lee Joo-wan, a semiconductor analyst at Seoul’s Hana Institute of Finance.
Samsung shares rose less than 1% in early trading in Seoul. They have climbed more than 20% this year, after declining 24% in 2018. Operating profit was 10.8 trillion won on sales of 59.3 trillion won, Samsung said, confirming preliminary numbers released earlier this month.
Samsung said it spent 23.7 trillion won in capital expenditures for semiconductors in 2018, compared with the 24.9 trillion won it said in October it would spend for the same year.
Samsung Faces Pressure to Cut Spending as Chip Demand Slackens
Operating income from the chip unit was 7.8 trillion won, accounting for the lion’s share of profit.
Contract prices for 32-gigabyte DRAM server modules fell 9.6% in the December quarter, according to InSpectrum Tech, while prices for 128 gigabit MLC NAND flash memory chips fell 8.4%.
Server DRAM prices may fall by more than 20% quarter-on-quarter in the first three months of this year, according to TrendForce.
Together with SK Hynix and Micron Technology, Samsung controls the bulk of the market for dynamic random access memory, or DRAM, chips, used to store data on personal computers and servers.
Hynix earlier this month posted earnings that missed estimates, saying memory demand slowed in the second half of last year even though it is likely to pick up later in 2019 as data centres resume their expansion.
Samsung echoed that view, saying that it sees a rebound in demand for memory chips and organic light-emitting diode screens from the second half this year.
“Investment in data centres will continue even though the memory industry is undergoing a rapid short-term correction,” Lee Soon-hak, an analyst at Hanwha Investment & Securities said in a Jan 22 report.
Samsung’s smartphone division posted 1.5 trillion won in operating profit, down from 2.4 trillion won a year earlier.
Profits fell due to a dip in sales caused by weak smartphone shipments amid a stagnant market despite strong seasonality, Samsung said.
The company will unveil its latest flagship smartphones in San Francisco on Feb 20, possibly including a bendable-screen device that it bets will be a game-changer in a stalling handset market.
While Samsung is the world’s biggest phone maker, it has been struggling with share of a stalling market as Chinese rivals Huawei Technologies and Oppo catch up.
China’s display makers also threaten Samsung in everything from legacy liquid-crystal televisions to state-of-the-art organic light-emitting diode smartphone screens.
Samsung’s display division earned 970 billion won for the company that supplies OLED screens to Apple for its iPhones.