Samsung Profit Halves as Downturn Wallops Chips and Smartphones
Samsung’s quarterly profit more than halved after a global industry downturn and trade tensions hammered demand for its chips and high-end smartphones, according to Bloomberg.
Korea’s largest company reported a less-than-expected 56% fall in operating income to about 6.5 trillion won ($5.6 billion) in the June quarter, but that was helped by an unspecified one-time gain from a customer that analysts estimate could have topped $800 million. The company won’t provide net income or break out divisional performance until it discloses final results toward the end of the month. Its shares slid 0.8% in Seoul.
Samsung 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 Trump administration 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.
Unpredictability surrounding the trade war between the U.S. and China, has sustained a downturn in the chip industry as smartphone demand tapers off and the pace of datacenter construction decelerates. Micron, the largest U.S. maker of computer memory chips, said last week it intended to “meaningfully” reduce its spending in its fiscal year 2020, on top of plans to idle 5% of production of memory chips in the last quarter.
In the second quarter, contract prices for 32-gigabyte DRAM server modules fell 19.3% compared to the previous quarter while those for 128 gigabit MLC NAND flash memory chips skidded 5%, according to inSpectrum Tech. DRAM price 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.