South Korean tech giant Samsung Electronics estimated today that its earnings grew at the slowest pace in more than a year in the second quarter.
Analysts said weak smartphone sales are likely to offset record high chip earnings.
The guidance gave investors an insight into how badly the decline in smartphone profitability is hurting the company's bottom line, after it warned in April of an earnings slowdown amid tougher competition.
The world's biggest maker of memory chips, smartphones and TVs said operating profit in the three months from April to June would grow 5.2% to 14.8 trillion Korean won ($13.2 billion).
This just missed an average estimate of 14.9 trillion won from 18 analysts polled by Thomson Reuters.
While the chip business would post its seventh consecutive record quarterly profit, analysts say, lacklustre smartphone earnings growth fuelled concerns the mobile business is running out of ideas to underpin sales of its premium Galaxy devices.
Samsung shares are down about 12% this year on concerns over slowing profit growth and a lack of technological innovation to drive smartphone sales.
New monthly data released this week by mobile phone market tracker Counterpoint Research highlighted Samsung's problems, showing its latest Galaxy 9 Plus premium handset had been overtaken by Apple's iPhone 8 as the world's top-selling smartphone due to weak sales in Europe.
Competition from cheaper Chinese brands like Xiaomi and Huawei have already seen Samsung lose market share in China and India, the world's top smartphone markets.
But while its smartphone business struggles, Samsung's profits are being driven by strong global sales of DRAM and NAND chips which account for about a third of its revenue.
Overall sales likely fell 4.9% from a year earlier to 58 trillion won, Samsung said, compared to analysts' average forecast of 59.7 trillion won.
The firm will release detailed earnings in late July.
The outlook for chips remains upbeat, with production of Apple's next iPhone likely to support NAND flash memory prices after they fell by up to 15% in the second quarter, according to chip price tracker DRAMeXchange.
The average selling price of DRAM chips, which help devices perform multiple tasks, is forecast to climb 14.8% this year, research firm Gartner says.
Investors are growing increasingly concerned about the prospect of an all-out trade war between China and the US, and how this could impact major exporters like South Korea's tech champions.
There are also fears that a Chinese price-fixing probe into chipmakers including Samsung could limit the upside for DRAM prices, as China is the largest importer of memory products.
The high cost of chips has hurt many electronics makers, with Chinese manufacturers among the hardest hit as they operate at lower margins than rivals.