Samsung Electronics reported Friday its operating profit has more than halved from a year ago as the chip industry’s boom-and-bust cycle proved more damaging than expected amid the escalated trade conflict between the United States and China.
According to its earnings guidance released on Friday, the Korean tech giant posted an operating profit of 6.5 trillion won ($5.56 billion) in the quarter ended June, down 56 percent from the same period a year earlier but up 4.33 percent from the previous three months. Revenue totaled 56 trillion won, down 4.24 percent on year but up 6.89 percent on quarter.
The second-quarter performance was above the market consensus of 6.08 trillion won in operating profit and 54.1 trillion won in sales.
As of 1:29 p.m., Samsung Electronics shares were trading 1.09 percent lower at 45,500 won.
The tech giant that produces components to finished hardware of electronics and smartphones stayed guarded about a recovery in the chip market. “The second-quarter balance reflected one-off profit in the display segment,” the company added in its earnings guidance.
For the first six months, its operating profit and sales tumbled 58 percent and 9 percent on year, respectively. Final second-quarter figures are due later this month.
The world’s largest chipmaker has been grappling with a supply glut in the memory chip market since late 2018 after a two-year boom. According to DRAMeXchange, DRAM prices plummeted nearly 30 percent in the first quarter amid softening demand from mobile markets and cloud computing data centers.
Hit by the sharp industry downturn, Samsung in the first quarter posted its weakest profit in more than two years. Its core semiconductor business, responsible for three-quarters of its earnings last year, reported a 64-percent fall in operating profit. Its display business logged a 560 billion won loss.
Chip sales are expected to remain subdued as prices show no sign of picking up. Korea’s semiconductor exports tumbled 30.5 percent on-year in May and another 25.5 percent in June, dragging down the country’s total shipments for the seventh straight month.
Supply disruption concerns are also mounting in the face of Japan’s export curbs to Korea. Tokyo has taken direct aim at Korea’s core industries by cutting off exports of three tech materials vital in producing chips and displays. The move is viewed as retaliation for Korean court rulings that ruled Japanese companies must compensate Koreans for forced wartime labor.
From Thursday, Japanese exporters need to apply for export permission each time they ship these materials to Korea, a process that takes about 90 days. Korea has so far enjoyed preferential fast-track status when importing from Japan.
Finding alternative supplies would not be easy as Japanese firms make up 70 percent to 90 percent of the worldwide markets of the three materials.