Samsung's profit halved on sluggish chip, smartphone sales

By Jun Ji-hye

Samsung Electronics suffered a 55.6 percent decline in operating profit in the second quarter from a year earlier due to the sluggish performance of its semiconductor and smartphone segments, the tech giant announced Wednesday.

In its report of the financial results for the April-June period, the company posted 56.1 trillion won ($47.5 billion) in sales and 6.6 trillion won in operating profit.

Sales decreased by 4 percent from a year earlier and operating profit fell 55.6 percent.

Compared to the previous quarter, the firm's sales and operating profit increased slightly by 7 percent and 5.8 percent, respectively, on the back of an improved performance of display panels and consumer electronics.

Samsung's semiconductor business posted an operating profit of 3.4 trillion won for the second quarter, the lowest since the third quarter of 2016 when the firm posted 3.37 trillion won.

“The weakness and price declines in the memory chip market persisted due to the continued effects of inventory adjustments by major datacenter customers in the previous quarters, despite a limited recovery in demand,” the company said in a release.

The smartphone business unit was also weighed down by slower sales of flagship models in addition to stagnant demand for premium products.

Increased marketing costs associated with growing competition and inventory adjustments of older models resulted in a drop in profit for the mobile business as well.

However, the display panel business, which logged an operating loss in the first quarter, returned to a profit, posting 750 billion won. The firm attributed this to a one-time gain and a gradual recovery in customer demand.

“Mobile display earnings increased led by higher shipments of OLED panels featuring new technologies such as fingerprint-on-display,” Samsung said. “Large display sales also saw a slight improvement from the previous quarter on demand for premium panels and reduced costs.”

The consumer electronics division has been boosted also by strong sales of new appliances and improved profitability of refrigerators and washing machines, though profits from TVs fell slightly year-on-year due to intensifying competition.

The company said uncertainties in the memory chip business are expected to persist in the latter half of the year, but raised expectations that demand would grow on strong seasonality and adoption of higher-density products.

For system semiconductors, there would be higher demand as well in mobile application processors and image sensors, the company said.

In a bid to improve performance of the smartphone segment, the firm plans to enhance its product lineup and expand sales ― it plans to launch the Galaxy Note 10 in August and the Galaxy Fold in September.