Samsung Announces 55.6 Percent Drop in Q2 Profit Amidst Weak Sales, Trade Tensions
Slow sales of Samsung’s memory, along with its flagship phones, have seen its profits sliced in half.
According to a new press release, Samsung’s operating profit took a 56 percent tumble to 6.6 trillion won ($7.3 billion USD) for its 2019 second quarter. Revenue also dropped by four percent to 56.13 trillion won (some $62.3 billion CAD).
The blame for this decline is being levied at Samsung’s semiconductor arm, with the South Korean tech giant noting that “weakness and price declines in the memory chip market” is affecting its bottom line, despite increased demand for memory chips.
The company said that demand is “expected to grow” in the latter part of the year, but it’s not clear if that will help to turn its fortunes around, as it warned that it still sees “volatility in the overall industry due to increased external uncertainties.” Though Samsung didn’t explicitly state what the uncertainties are, it is likely referring to the escalating trade dispute between South Korea and Japan where the latter has imposed trade restrictions on key materials.
The quarter is the second in a row in which the South Korean company reported operating profits that fell by more than half from a year ago. During its first quarter, Samsung saw its profit collapse by around 60%.
Samsung’s big problem is that the semiconductor industry is being weighed down by a period of inventory adjustment that has led to a glut of supply. As a result, demand is low, leading to lower prices.
“In the past, the memory chip business has often saved Samsung’s profits, especially with the recent slowdown in the smartphone handset market,” said Holger Mueller, principal analyst and vice president of Constellation Research Inc. “But now the memory chip business is weighing Samsung down too. It can only hope that the full inventory is going to be consumed and that it will be able to weather the storm.”
Analysts say a recovery isn’t expected until 2020 at the earliest.