Samsung’s profit halves on weak chip, smartphone sales in Q2

Seoul, July 31 (IANS) Samsung Electronics said on Wednesday its second-quarter net profit more than halved from a year earlier on weak chip prices and tepid smartphone sales, warning that Japan's export curbs cloud its business outlook.

Samsung said it sold 8.3 million smartphones and 4 million tablets in the second quarter, predicting similar levels of shipments in the third quarter.

The net profit for the world's largest chip and smartphone maker came to 5.18 trillion won ($4.4 billion) in the April-June period, a 53.1 per cent fall from a year earlier, the company said in a regulatory filing.

The operating profit plunged 55.6 per cent on-year to 6.59 trillion won, and sales slipped 4 per cent to 56.1 trillion won in the three-month period, the firm said in a statement.

Samsung said the lower-than-expected memory chip prices weighed on its bottom line despite a slight recovery in demand in the second quarter.

The semiconductor business posted 3.4 trillion won in operating profits in the second quarter, the lowest since the third quarter of 2016.

"The weakness and price declines in the memory chip market persisted as the effects of inventory adjustments by major data center customers in the previous quarters continued, despite a limited recovery in demand," Samsung said.

Although the chip giant expected a gradual recovery in the demand side in the latter half of this year, it expressed concerns over rising uncertainties amid the prolonged trade war between the US and China and, more recently, Japan's export curbs on South Korea, reports Yonhap news agency.

Samsung is also preparing for Japan's decision to remove South Korea from a list of trusted buyers as early as Friday, which would affect a broader range of high-tech materials.

"Even though the current Japanese measures don't ban exports of the materials, the new export regulations add burden (on the company), and visibility is low on Japan's trade measures," Robert Yi, executive vice president for investor relations, said.

"Company executives are preparing various measures to minimize its negative impact on the company."

Samsung said it is hard to predict fresh cash flows due to global trade tension, delaying its earlier plan to announce its shareholder return policy to early 2020.

Samsung expected prices of NAND, mostly used in mobile devices, will pick up in the third quarter, given the stabilising inventory level and rising demand in the second quarter.

The mobile division also posted lacklustre profits despite strong sales of budget smartphones, the Galaxy A series, in emerging markets.

Although Samsung has upped the ante to invigorate the flattening smartphone market by releasing 5G smartphones in South Korea and the US, it failed to shore up its profits in the mobile division.

To boost demand in the premium segment, the firm plans to release its latest phablet, the Galaxy Note 10 in August and Galaxy Fold in September. Samsung had planned to release the foldable device in April but delayed the release to September as it took time to fix some durability issues.

"We will sell a limited volume of Galaxy Folds in limited countries this year and expand foldable products in various forms," a Samsung official said during the conference call. "We expect the Galaxy Note 10 to achieve higher sales volume than its predecessor, the Note 9."

The network business showed solid results on the commercialisation of 5G service in South Korea, the firm said, adding it will step up efforts to expand global presence in the 5G market.

In contrast, the display division was a rare bright spot for the Korean tech firm, which has strength in the flexible OLED displays used in premium smartphones.

The consumer electronics division was boosted by strong sales of new appliance products, but profits from TVs fell slightly from a year earlier due to intensifying competition.