Samsung's profit falls by 56% due to slow chip and flagship phone sales

Concluding updated: July 31st, 2019 at 10:31 UTC+01:00

Samsung had warned investors in its earnings guidance for Q2 2019 that there volition exist a significant refuse in profit for the period catastrophe June 2019 compared to a year ago. It warned that the profit would decline by 56 percent as revenue slid by 4 percent compared to Q2 2018.

The company has posted its total earnings consequence for the 2nd quarter of the year today. The numbers are simply marginally better than what Samsung had forecasted but they even so paint a gloomy film. Its profit is down by 55.61 pct equally consolidated sales have suffered due to slow fleck and flagship phone sales.

Samsung'south Q2 2019 profit has slumped past more half

Samsung has posted 56.thirteen trillion won in consolidated acquirement for the quarter catastrophe June 2019. That'southward simply under $48 billion. Information technology made vi.6 trillion won or merely about $5.six billion in operating profit. Samsung had made $13.three billion in operating turn a profit this time concluding twelvemonth. It had warned of significant challenges ahead which would drag down earnings.

One of the principal reasons why Samsung's profitability has declined is because of the supply glut of DRAM and NAND wink memory chips. Supply is greater than demand which is pushing down prices. Samsung had benefitted greatly when supplies were tight and its chips could control higher prices. That'due south what led the company to post record profits concluding year.

Memory scrap sales business relationship for two-thirds of Samsung'due south unabridged sales so this is plainly responsible for the pass up in profitability. The company notes in its release that it saw need for NAND and DRAM slightly increase during the quarter equally its datacenter customers resumed purchasing. It now expects need to abound in the second one-half of this twelvemonth but warns of volatility because of external uncertainties.

Galaxy S10 fails to maintain sales momentum

Samsung continues to face challenges in the mobile marketplace. While revenue was upwardly by eight percent at its mobile segmentation, the profit came downwards by 42 percent compared to Q2 2018. Samsung points out that the overall market place demand for smartphones declined during the quarter due to seasonal weakness. However, Samsung's shipments have increased quarter-over-quarter due to stiff sales of the new Galaxy A serial, including the Galaxy A50 and Galaxy A70. It also mentions that sales of flagship models fell QoQ because of "weak sales momentum" for the Galaxy S10 and stagnant demand for premium devices.

Samsung says that the overall mobile market is expected to remain under pressure in the 2nd half of this year. It reiterates that the visitor will strengthen its flagship lineup and also increase sales of new mass market models. It's going to focus on successful launches of the Milky way Notation 10 and the Milky way Fold in the third quarter of this year and will too enhance the 5G smartphone lineup.

It's non going to be smooth sailing for the company. Samsung besides warns investors of the challenges it faces due to external uncertainties, a possible reference to the business organization implications of various ongoing trade disputes between economic giants. Due south Korea and Japan'due south dispute could have serious implications for Samsung's business, particularly its flake division.