SEOUL -- Samsung Electronics will announce its full fourth-quarter earnings on Thursday, having announced its revenue and operating profit earlier this month. From the impact of the Wuhan coronavirus to Vice Chairman Lee Jae-yong's legal battle, here are five things to watch ahead of the South Korean tech giant's announcement.
Samsung shares fell 3.29% to 58,800 won on Tuesday, after hitting all-time high of 62,800 won in the previous trading, amid increasing worries over the outbreak of the novel coronavirus in the Chinese city of Wuhan. The benchmark Kospi lost 3.09% to 2,176.72.
Analysts say that Samsung may face pressure from both the demand and supply sides if the coronavirus continues to spread in China and beyond. Samsung operates a semiconductor factory in Xian, among other facilities in the country.
"It is natural that people may reduce their consumptions if they do not go around. That may push supply chain players to cut their demand," said CW Chung, a senior analyst at Nomura. "On the supply side, Samsung runs many factories in China including assembly ones. Even though they are not based in Wuhan, but the company can shut down some of them if things get worse."
Local media has reported that the company decided to curtail business trips to the country. Samsung declined to comment on the situation, saying it will announce later if there is any information to share. "We are coping with the situation according to the government's policy," said a Samsung source asking not to be named.
Chip market expectations
Analysts say the memory chip market is hitting the bottom after a slump of more than one year, which would help Samsung rebound from poor earnings. The company said that its operating profit plunged 53% to 27.7 trillion won ($23.5 billion) in 2019, largely due to memory chip woes.
Samsung is the world's largest memory chip maker, controlling nearly half of the market for DRAM and about one third of the market for NAND.
"We expect Samsung Electronics' semiconductor unit may enjoy price increase from the first quarter as servers are leading memory chip demand," said Kim Dong-won, an analyst at KB Securities. "We forecast DRAM's [average selling price] will rebound in the first quarter in six quarters since the first quarter of 2018. NAND ASP will also continue to grow from the fourth quarter of 2019.
The mobile market battle
Samsung's mobile sector is recovering from years of downturn, thanks largely to its midrange Galaxy A smartphone series. The company also benefited from the U.S. crackdown on China's Huawei Technologies, Samsung's key rival in the global smartphone market.
However, Samsung's presence is threatened by Huawei and other Chinese competitors in India, which has surpassed the U.S. to become the world's second largest smartphone market. Samsung shipments in the country remained almost flat year-on-year in the fourth quarter of 2019, and declined 5% for all of 2019, according to Counterpoint Research. "It needs to double-down to keep any momentum going," Counterpoint said in a report on Friday.
Samsung plans to host an "Unpack" event in San Francisco next month where it will launch its new flagship Galaxy S smartphone and a clam-shell foldable smartphone.
Trade war developments
Samsung is monitoring trade war developments carefully after the U.S. and China signed a trade deal in Washington two weeks ago. The trade war has provided Samsung with opportunities in some of its businesses.
A Samsung executive said in an earnings conference call in October that orders for its DRAM chips from China increased in the third quarter as Chinese companies stockpiled parts due to the trade war. TrendForce, a Taipei-based research firm, also said in November that Samsung's DRAM sales rose 30% in the third quarter as "Chinese smartphone vendors aggressively pulled their quarterly shipments forward."
Lee's legal issues and leadership
Samsung also faces some internal uncertainties. Vice Chairman Lee Jae-yong is embroiled in a corruption scandal involving former South Korean President Park Geun-hye. The Seoul High Court said two weeks ago that it would take into account a compliance committee the company has recently set up as it determines whether to hand Lee a new jail term.
Earlier this month, Lee reshuffled the company's management. He retained the three CEOs in charge of semiconductors, mobile and home appliances, respectively, but dispatched younger executives to the mobile and network departments to lighten the workload of their chiefs.