Samsung Expects Dramatic Q2 Profits Drop

Frank Lenk


Published: 07/05/2019 09:30:41 AM EST in Frank Lenk

Samsung Expects Dramatic Q2 Profits Drop

Samsung Electronics Co. has said it expects Q2 profits this year to come in about 56% lower than they did last year.

In its latest Earnings Guidance report, the company states that consolidated sales will be about 56 trillion Korean won (US$48 billion), and consolidated operating profit about 6.5 trillion Korean won (US$5.6 billion). These compare to sales of 58 trillion Korean won in Q2 2018, and operating profit of almost 15 trillion Korean won.

Samsung will presumably offer more detail when it issues its Q2 earnings report. For now, many theories have been put forward, to account for the drop.

One likely problem is a decline in weak demand for memory chips, which has not been helped by the ongoing trade war between the US and China. Huawei is known to be a major buyer of Samsung chips, which shows just how the ripple effects of this destructive dispute will tend to spread.

Slowing demand for Apple's iPhone has probably not helped. This has likely reduced demand for Samsung's OLED displays. But it's not clear whether Apple will have to compensate Samsung for failing to meet minimum order requirements.

Samsung did state that it had gained some benefit from weak domestic currency. And that it had seen a "one-time gain related to the display business," which some speculate may be related to the growing overall acceptance of OLED displays in smartphones.

The significance of other factors has yet to be properly assessed. The conspicuous failure of the Galaxy Fold undoubtedly did little to boost Samsung's smartphone business. It also appears that the Fold uses a plastic film made in Japan, supply of which has been impacted by a recent Japanese restriction on exports to South Korea.

However, most estimates relate the downturn to chip sales, which continue to account for over two-thirds of Samsung's revenues.





Article Tags:  Samsung, Huawei, chip, sales, financials, OLED, Apple

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Samsung Expects Dramatic Q2 Profits Drop








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