Samsung profits likely dropped 56pc amid Huawei woes

5 Jul 2019

Image: TKKurikawa/Depositphotos

Estimates released by Samsung indicate that its profits have plummeted as much as 56pc, likely harmed by the knock-on effect of Huawei’s smartphone woes.

Though Samsung’s official earnings are not due to be released for a while yet, preliminary estimates released today (5 July) indicate that the company’s profits may have dropped by as much as 56pc, falling to 6.5trn won (€4.9bn). The report places its consolidated sales for the second quarter of 2019 at 56trn won (€42.4bn).

This is the second quarter in a row that the beleaguered South Korean tech giant has reported a considerable dip in profits. This, in conjunction with the difficulty it has run into launching its foldable phone, paints a rather gloomy picture for the company’s current outlook.

The dip in the last quarter was chalked up to a drop in the sale of memory chips, which suffered a 23pc decline in revenue. Healthy sales from its newly launched S10 and A series consumer models were a salve, but ultimately weren’t enough to reverse trends.

While Samsung has yet to explain this quarter’s profit decline, it is conceivable that it is still grappling with similar issues.

Huawei woes

Huawei’s struggle amid being placed on a US entity list – effectively a trade embargo with US companies – resulted in a sharp decrease in demand that has had a knock-on effect and hurt Samsung’s business, according to analysts.

Though US president Donald Trump recently claimed that he would be easing the trade ban, there is still much confusion as to whether the promised reprieve will actually come to pass, and so whether Huawei will continue to be barred remains to be seen.

In certain markets, Huawei being in dire straits will help Samsung’s smartphone sales – it is estimated that Samsung could sell 37m more smartphones annually should Huawei’s trouble continue. However, it’s difficult to say whether that will necessarily offset the lagging chip demand.

Samsung is also staring down the barrel of a potential curbing of Japanese exports to South Korea of high-tech materials used in the production of chips and smartphones. The move has been dubbed a retaliation to South Korean wartime compensation claims that Japan is adamant were resolved decades ago.

One-off Apple payout

Samsung reportedly received a reimbursement of around 800bn won (€607m) from Apple after the US company missed an agreed-upon sales target. Apple uses Samsung’s OLED screens in its iPhones.

Though a welcome windfall, this latest Q2 projection is still likely to cause disquiet and raise broader questions about the health of both global smartphone and semiconductor markets.

Illuminated Samsung logo. Image: TKKurikawa/Depositphotos

Eva Short was a journalist at Silicon Republic