It’s Going to Be a Rough Year for Samsung

A man passes a signboard of Samsung Electronics' Galaxy Note5 at its showroom in Seoul on October 29, 2015. South Korea's Samsung Electronics pulled out of an extended earnings dive on October 29, reporting a nearly 30 percent surge in third-quarter net profit and announcing a 10 billion USD share buyback. AFP PHOTO / JUNG YEON-JE (Photo credit should read JUNG YEON-JE/AFP/Getty Images)
Photograph by Jung Yeon-Je — AFP/Getty Images

South Korean tech giant Samsung Electronics said it expects a difficult business environment in 2016 due to weak global economic conditions and heightened competition in key businesses including memory chips and smartphones.

In a statement on Monday, Samsung said CEO Kwon Oh-hyun told employees in a New Year’s address that low global growth will persist this year, with greater uncertainty stemming from issues such as financial risks for emerging countries.

The comments, which didn’t disclose specific forecasts, come amid growing concerns that October-December results for the world’s biggest maker of smartphones and chips may be weaker than previously expected.

“Negative impact from weak demand and falling sales prices for semiconductor and liquid crystal display industries was likely bigger than initially anticipated,” brokerage Korea Investment said in a report issued separately on Monday.

Korea Investment lowered its estimate for Samsung’s fourth-quarter operating profit to 6.4 trillion won ($5.41 billion) from 6.8 trillion won previously. The mean estimate of 36 analysts’ forecasts compiled from a survey by Thomson Reuters I/B/E/S is for operating profit of 6.8 trillion won, 8.1% lower than the 7.4 trillion won booked in the third quarter.

Samsung CEO Kwon also warned of greater competition in the firm’s main businesses, Samsung said in its statement, without offering detailed financial forecasts.

The firm is expected to issue official earnings guidance for the October-December period on Friday. It already said in late October that operating profit for the quarter will be lower than July-September earnings, citing seasonally weaker demand for its component businesses.

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