Samsung Electronics expects 56% drop in Q3 operating profit

Darnell Taylor
October 8, 2019

The main reason behind the drop is the memory chip business of the company which is now suffering from low demand.

Analysts said that Samsung benefited from USA sanctions on Huawei Technologies Co Ltd that effectively bar US firms from supplying its Chinese rival.

Consultants had thought Samsung would employ a heavier hit from the ongoing plug in quiz for memory chips, which fable for round two thirds of the firm's profits. The forecast report doesn't mention anything about sales of the company's latest flagship, the Samsung Galaxy Note 10, or any mobile devices, for that matter.

"With its foldable smartphone that no other competitors have yet launched, Samsung will likely lead the high-end smartphone market as it would mass produce foldable smartphones next year", said Song Myung-sup, an analyst at HI Investment & Securities.

According to financial analysts, the inventory levels of DRAM at Samsung and SK hynix will be normalized by the second quarter of next year.

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In a regulatory filing ahead of detailed earnings due later this month, the South Korean tech giant said operating profit for the July to September quarter would likely tumble 56 to 7.7 trillion won (USD 6.44 billion).

"The display business also improved as high-resolution Organic Light-Emitting Diodes (OLED) display orders from Apple for the new iPhone increased", the source added. This is basically due to the decline in global memory chip prices. As CNBC noted, if Samsung's forecast is correct, then this will be the third consecutive quarter where its operating profit is halved from the same period a year ago.

The estimates for the third quarter showed a slight rise from the April to June period, which analysts attributed mainly to improvements in the mobile business.

While Samsung has been benefiting from Huawei's woes in terms of smartphone sales, its status as the world's biggest semiconductor firm by revenue also leaves it exposed to its Chinese rival's troubles. "Data centre customers, a major driver for memory chip business, are pursuing conservative investment for the time being, not particularly uplifting news for Samsung".

Samsung reported gross sales of round 62 trillion Korean gained (£42bn) for the three months to the end of September, down round 5pc one year on one year. It held a 20 percent market share back in 2013, but saw that dominance plummet to just 1% in 2018.

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