Samsung Reported Sharply Lower Profit

Samsung Reported Sharply Lower Profit
Fotolia

Samsung shares slid after company reported sharply lower profit amid global trade tensions and a wireless industry slump, according to Bloomberg.

Net income fell 54% from a year earlier to 5.06 trillion won ($4.3 billion) for the three months ended June, Samsung said in a statement, while revenue dropped 4% to 56.1 trillion won. Shares slid as much as 3.3%.

The world’s largest maker of memory chips and smartphones has been hammered by geopolitical tensions and a wireless slump. The U.S.-China trade war has rattled the global tech-supply chain and weighed down the price of memory chips used in phones and data centers.

In addition, Japan restricted the export of materials used in chips and displays to Korea, raising concern over potential disruptions at Samsung and SK Hynix. Samsung had planned to announce its three-year shareholder return policy, but put off the announcement until early next year, citing significant new challenges.

Samsung did signal optimism about improvements for the memory business for the rest of the year. “In the second half, demand is expected to grow although the company sees volatility in the overall industry due to increased external uncertainties,“ Samsung said in a statement.

The company said memory demand increased in the second quarter as data-center customers resumed purchasing and mobile applications adopted higher-capacity products. They didn’t commit to cutting capacity saying that expenditure plans for 2020 haven’t been finalized.

Samsung had reported preliminary numbers this month that showed operating profit fell more than 50% and its net income did exceed the 4.88 trillion won average of estimates. The mobile division posted a 42% decline in operating income to 1.56 trillion won. Samsung said its profitability eroded because of intensifying competition in low-to-mid range markets, and vowed to launch successfully the Galaxy Note 10 and Galaxy Fold in the second half of this year.

Samsung’s display division posted operating profit of 750 billion won due to a one-time gain and a gradual demand recovery. The consumer electronics unit, which includes TVs and appliances, posted 710 billion won of profit.