Samsung warned shareholders that its first quarter profits are expected to miss market expectations due to declining memory prices and display panel demand.
Companies often have to revise their financial estimates and warn investors about the realities of their situations not meeting analyst expectations. But this warning is different, because as Seeking Alpha noted, Samsung “has never previously provided comment before its official earnings estimate.”
This “unprecedented statement” doesn’t bode well for Samsung. The company had to revise its expectations for the fourth quarter of 2018 because of the struggling memory market; now it’s breaking a long-running code of silence to let investors know that it didn’t fare well in the most recent quarter.
Samsung isn’t the only company struggling in the memory market. DRAMeXchange reported on March 25 that memory prices continued to fall in the first quarter “due to the overabundance in inventory levels,” with the research firm saying it saw an average selling price (ASP) drop of 20 percent.
These problems aren’t expected to be alleviated any time soon. DRAMeXchange said that memory suppliers are sitting on between 5 and 7 weeks of inventory. It also reported that “the accelerating drop in prices did not stimulate a recovery in demand,” so it expects prices to continue to fall in the future.
Combining those struggles with falling demand for display panels and it’s not hard to see why Samsung’s profits might take a hit. (And that’s not even considering issues in the consumer market.) The company has continued to invest in its memory business, but those investments have yet to pay off.