It’s not just Apple — Samsung is hurting, too

Apple Samsung

Samsung is the latest tech giant to warn that its business is suffering.

The South Korean company said Tuesday that its fourth-quarter operating profit is set to plunge nearly 30% from a year earlier, well below analysts’ forecasts. It blamed the sharp drop on “lackluster demand” for its memory chips and “intensifying competition” in the smartphone industry.

Samsung’s guidance comes after Apple (AAPL) set off alarm bells last week by warning that it will sell fewer iPhones than previously expected, mainly because of disappointing demand in China amid an ongoing trade war with the United States.

Samsung, the world’s largest smartphone maker, didn’t mention China specifically in its earnings guidance on Tuesday, but it said “mounting” macroeconomic uncertainties are affecting its business.

Shares in Samsung ended the day down about 1.7% in Seoul. The stock lost nearly a quarter of its value last year.

China, the world’s largest smartphone market, is experiencing a deepening economic slowdown that’s affecting businesses around the world.

As well as selling its own phones, Samsung supplies key parts like chips and display screens to other major device manufacturers. Apple’s latest iPhones use Samsung’s OLED screens.

The South Korean company said it expects operating profit for the fourth quarter of 2018 to come in at 10.8 trillion won ($9.6 billion), compared with about 15.2 trillion won ($13.5 billion) in the same period a year earlier. It predicted sales will drop about 11% to 59 trillion won ($52.5 billion).

It warned the weak performance is likely to continue, predicting its earnings will “remain subdued in the first quarter of 2019 due to difficult conditions for the memory business” before improving later in the year.

Apple Samsung

The company is also hoping that the introduction of new technology like 5G services and foldable smartphones will help boost its mobile division.

Analysts weren’t entirely surprised by Samsung’s bleak statement.

“There is obviously the competition from the Chinese players that is limiting the growth of Samsung in many markets including the high-growth ones like India and South East Asia,” said Kiranjeet Kaur, a Singapore-based analyst with research firm IDC.

According to IDC’s latest report, Samsung still sells the most devices globally, but experienced a 13% decline in sales in the third quarter of 2018, compared with the same period a year earlier. Chinese smartphone maker Huawei, meanwhile, posted 33% growth.

And while many smartphone makers still use Samsung as a supplier, memory chip prices have “passed their peak days,” Kaur added.

Samsung will report full fourth-quarter results at the end of this month.

$1 trillion is leaving Britain because of Brexit

leaving Britain because of Brexit

Brexit hasn’t happened yet but it’s already shrinking the United Kingdom’s financial services industry.

Banks and other financial companies have shifted at least £800 billion ($1 trillion) worth of assets out of the country and into the European Union because of Brexit, EY said in a report published Monday.

Many banks have set up new offices elsewhere in the European Union to safeguard their regional operations after Brexit, which means they also have to move substantial assets there to satisfy EU regulators. Other firms are moving assets to protect clients against market volatility and sudden changes in regulation.

The consultancy said the figure represented roughly 10% of the total assets of the UK banking sector, and was a “conservative estimate” because some banks have not yet revealed their contingency plans.

“Our numbers only reflect the moves that have been announced publicly,” said Omar Ali, head of financial services at EY. “We know that behind the scenes firms are continuing to plan for a ‘no deal’ scenario.”

EY has tracked 222 of the biggest UK financial services companies since the Brexit referendum in June 2016.

Britain is scheduled to leave the European Union in just 81 days, but Prime Minister Theresa May still needs to win support in the UK parliament for the divorce deal she struck with the rest of the European Union.

Parliament is due to vote on the deal next week. If May ultimately fails to push the agreement through, the chances of the country crashing out of the European Union without a deal will soar.

The Bank of England said the fallout from that scenario would be worse than the 2008 financial crisis.

For financial institutions, a no-deal Brexit would be a nightmare. The country’s agreements with EU regulators would cease to exist and banks would find themselves in a legal vacuum, meaning they would be unable to continue doing some of their business across the bloc.

While the European Union has said it will implement some steps to avoid a complete meltdown, it said its contingency plan is only a short-term solution aimed at protecting its own interests.

“Financial services firms have no choice but to continue preparing on the basis of a ‘no deal’ scenario,” Ali said.

leaving Britain because of Brexit

The financial services industry employs 2.2 million people across the country, and contributes 12.5% of GDP. It generates £72 billion ($100 billion) in tax revenue each year, according to the City of London Corporation.

The UK economy has already suffered from Brexit. Inflation spiked and consumer confidence dropped, hurting the country’s retail sector. Business investment has fallen dramatically, as companies put plans on hold because of the uncertainty. Major manufacturers, including Airbus, have warned they may have to quit the United Kingdom if there’s a no-deal Brexit.

German engineering group Schaeffler is closing two plants in the United Kingdom because of the uncertainty.

The latest evidence of the pain came on Monday, when the UK Society of Motor Manufacturers and Traders said new car registrations in the country fell 6.8% in 2018. It was the second consecutive year of declines.

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