Samsung Electronics yesterday said that it expects operating profit to tumble 56 percent in 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.
Operating profit for the second quarter is forecast to reach about 6.5 trillion won (US$5.6 billion), down 56 percent from a year earlier, the firm said in a statement.
Revenue is expected to fall 4.2 percent to 56 trillion won.
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 it is crucial to South Korea’s economic health.
Samsung launched its top-end S10 5G smartphone earlier this year, after South Korea won the global race to commercially launch the world’s first nationwide 5G network, but in April it made a high-profile decision to push back the release of its new Galaxy Fold phones after reviewers provided with early devices reported screen problems within days of use.
While Samsung’s device was not the first folding handset, the smartphone giant was expected to help spark demand and potentially revive a sector that has been struggling for new innovations.
The South Korean firm had spent nearly eight years developing the Galaxy Fold as part of its strategy to propel growth with groundbreaking gadgets.
The firm is yet to announce its new release date.
Samsung supplies screens and memory chips for its own smartphones and Apple Inc, and server chips for cloud companies such as Amazon.com Inc, but it is also one of South Korea’s major semiconductor manufacturers that are being affected by Tokyo’s restriction of exports to the nation.
The measures — which raised the stakes in a protracted dispute over South Korean court rulings requiring Japanese firms to compensate victims of a World War II forced labor policy — are expected to significantly slow the export of several key materials used by Samsung.
IHS Markit display research director Tadashi Uno said that an end-product that could be affected by Tokyo’s newly announced restrictions is Samsung’s Galaxy Fold.
“The display of the Samsung Galaxy Fold — now in preorder status in the United States — is produced utilizing fluorinated polyimide film from Sumitomo Chemical, which is a Japanese electronic materials firm,” Uno said. “South Korea-based Kolon Industries could act as an alternative supplier for the Samsung foldable smartphone display.”
Samsung is also set to unveil its latest phablet, the Galaxy Note 10, in New York next month, but analysts say it is unclear whether its cutting edge products would do well in the global market.
“Unlike South Korea, many countries are still without a 5G network and this gives overseas customers fewer reasons to buy a 5G phone, which also happen to be quite expensive,” Seoul-based Nomura Securities analyst C.W. Chung said.
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