The weak guidance from Samsung comes after Apple lowered its revenue and gross margin predictions last week, citing a weakening Chinese economy and lower-than-expected iPhone revenue in Greater China as some of the factors.
Concerns over a slowdown in the Chinese economy have kept investors on edge. It could pose a worry for Samsung since it sells memory chips used in smartphones and data centers to Chinese firms. At the same time, it also has production plants in the world’s second-largest economy for some of the memory chips — those are likely to be hurt by the ongoing trade tensions between Beijing and Washington.
In December, a report from the Korea International Trade Association said the trade war may pose higher risks to both Samsung and its chipmaking rival SK Hynix.
At the same time, a slowdown in Chinese consumer demand could potentially affect Samsung’s consumer electronics business, including smartphones. One analyst said that China accounts for between 20 to 30 percent of global consumer tech demand.
Hosseini said that he does not expect Samsung’s fundamentals to improve in the March quarter — the weakness may even extended into the quarter ending June 2019.
“You can argue that there could be a rebound in the second half but the slope of the recovery, or how bad fundamentals are going to look like in March or June quarter, is not really clear,” he said.
For his part, Newman said that while things are likely to improve in the later half of the year, it’s still “too early” to get confidence that there’s going to be a rebound in Samsung’s memory business.
“What we can see, and what the company is also saying, is that demand is going to improve in the second half. And in addition to that memory supply is being pushed out,” he said, adding that the oversupply in the market is expected to ease and could help improve the business condition.
“Whether there’ll be a steep rebound, I think it’s really too early to tell at this point but it should improve somewhat,” Newman said.
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