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Samsung forecasts a big drop in its 2Q operating profit

By Ng Chong Seng - on 8 Jul 2019, 12:41am

Samsung forecasts a big drop in its 2Q operating profit

According to this Reuters report, Samsung Electronics has forecasted a big drop in its second quarter operating profit. Ahead of detailed earnings figures that will be revealed in late July, the South Korean chaebol’s operating profit for the period between April-June has likely fallen 56% to 6.5 trillion won (US$5.6 billion). For those following, this will also be the third consecutive quarter that the company is posting year-on-year profit declines.

Expectedly, the on-going China-U.S. trade war is cited as a key reason for Samsung’s woes. Because of the increased tariffs, Samsung is said to be selling fewer chips. The U.S.’s sanctions on Huawei is also hurting Samsung because Huawei is a key Samsung client. Japan’s curbing of technology exports to South Korea is another pain point, as the company uses a lot of these materials for manufacturing the chips and display panels that are used in its smartphones and TVs.

But Samsung did make one-off gains that helped the bottom line. According to Reuters, analysts said that Samsung has gotten reimbursement worth about 800 billion won (US$683.5 million) from Apple for displays sold to the iPhone maker. Apple is paying Samsung because the former missed a sales target that both companies agreed upon earlier.

In case you’re wondering, Samsung isn’t the only South Korean smartphone maker facing drops in profits. The same report says LG Electronics’ second quarter operating profit is likely to fall 15.4% compared to the same quarter last year; and the company is estimating a 652.2 billion won profit (US$557.2 million) for the April-June period.

Source: Reuters.

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