Samsung Electronics said Friday, July 5, it expects operating profit to tumble 56% for the second quarter of this year in the face of a weakening chip market. The world’s largest maker of smartphones and memory chips has enjoyed record profits in recent years despite a series of setbacks, but is now struggling, with chip prices falling as global supply increases while demand weakens.
Unpredictability surrounding the trade war between the U.S. 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 datacenter construction decelerates. This puts the Huawei situation at the epicenter of this entire problem. It’s a real shame, but its gets worse.
“Memory prices are likely to keep sliding due to the ongoing trade war,” said Song Myung-sup, an analyst at HI Investment & Securities Co., adding that shipments should be stable as Chinese customers who haven’t received products from U.S. chipmakers are likely to increase orders. This isn’t boding well for most chipmakers unfortunately.
On the bright side, things aren’t all bad for good old Samsung. Samsung’s smartphone business could get a boost if the Huawei ban remains. HI Investment & Securities predicts that Samsung may sell 37 million more smartphones a year (which will take some pressure off the other divisions too as they’ll use some Samsung chips).
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