Wednesday, 16 October, 2019

Samsung flags 56% decline in operating profit in Q3

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Ginger Lawrence | 08 October, 2019, 22:24

The South Korean technology giant estimated an operating profit of 7.7 trillion won ($6.4 billion) for the July-September quarter, which would be a 56.2 per cent drop from the same period a year ago.

A simmering dispute between South Korea and Japan, which has seen Tokyo impose restrictions on chemical exports crucial to the South's world-leading chip and smartphone companies - is also expected to affect Samsung Electronics' key products.

The estimates for sales and operating profit are down 5.29 percent and 57.3 percent on-year, respectively.

The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world's 11th-largest economy, and crucial to South Korea's economic health. In preparation for that report, the company released an official forecast for investors that gives us a little bit of an idea of what to expect.

The high sales of the Galaxy Note 10 and the popularity of Galaxy Fold are expected to have contributed to restoring the mobile unit's profitability, they said.

In the third quarter, contract prices for 32GB DRAM server modules fell 13.8% compared to the previous quarter while those for 128GB MLC NAND flash memory chips rose 12.3%, according to inSpectrum Tech.

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The company cited plummeting chip prices and slower chip demand that time, which are issues that continue to plague not just Samsung, but also other chipmakers.

"It looks like Samsung Electronics has bottomed out", said an industry watcher who asked not to be named, adding that its earnings would recover next year after a seasonal slowdown during the fourth quarter.

Analysts credit Samsung with receiving a boost from US sanctions on Huawei that effectively bar USA firms from supplying the Chinese competitor.

Lee was also instrumental in propelling the company's rise due to his bold decision making on matters like capital investment. Thus hurting its memory chip business is detrimental to Samsung.

It tumbled 56.2 percent compared with the same quarter of a year ago when Samsung recorded its record operating profit, but it was up 16.7 percent from the previous quarter. However, the full numbers will be released later this month.