Samsung’s quarterly profit more than halved after a global industry downturn and trade tensions hammered demand for its chips and high-end smartphones.
Korea’s largest company reported a less-than-expected 56% fall in operating income to about 6.5 trillion won (€4.9bn) in the June quarter — but that was helped by an unspecified one-time gain from a customer that analysts estimate could have topped €710m.
Samsung — the world’s biggest producer of smartphone screens, semiconductors and mobile phones — is grappling with plateauing demand in the face of an economic slowdown.
Its memory chips remain a barometer for everything from computers to smartphones and have been one of the hardest-hit components since President Donald Trump’s tariffs took effect in May. Jitters over Samsung’s biggest cash cow grew this week when Japan slapped export restrictions on materials needed for display and chip production, potentially hammering also rival SK Hynix.
“Considering the structural downturn in memory prices and the mobile business, it’s unlikely Samsung would exceed earnings estimates” in the second half, Meritz Securities analyst Kim Sunwoo said.
Trade tensions are walloping chip prices worldwide. Unpredictability surrounding the trade war between the US and China — where Samsung earns the bulk of its revenue — has sustained a downturn in the chip industry as smartphone demand tapers off and the pace of data centre construction decelerates. Chip memory prices drops are projected to widen to up to 15% in the current quarter and as much as 10% in the fourth quarter, TrendForce has estimated.
“Memory prices are likely to keep sliding due to the ongoing trade war,” said Song Myung-sup, an analyst at HI Investment and Securities, adding that shipments should be stable as Chinese customers who haven’t received products from US chipmakers are likely to increase orders.
“Samsung’s smartphone business will start to benefit from the US ban on Huawei” in the second half, he added.
Japan’s move to restrict the export of chip materials to South Korea also alarmed industry players because it threatened to derail domestic production. But some analysts say it could even boost memory prices.
A one-off gain for the display business assuaged some of Samsung’s pain.
The company remains the foremost producer of high-margin organic light-emitting diode displays but hit a snag last year when supplies to Apple suffered after the marquee iPhone X fared worse than expected.