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Samsung Reports a 55.6% Drop in Second-Quarter Profit
Imagine your income drops by 50% or more, you wouldn’t be happy, right? Well, Samsung is facing this dilemma in the second quarter of 2019, as demand for their chips and smartphones slumps. Samung stated year-on-year, their Q2 operating profit fell 55.6% to 6.6 trillion won (or $5.6 billion or thereabouts).
This follows last quarter’s news of the company’s operating profit also dropping by more than half.
“The same issues that hit its earnings during the first quarter of this year have continued, including lower memory prices as major datacenter customers adjust their inventory, meaning they are currently buying less chips (the weak market also impacted competing semiconductor maker SK Hynix’s quarterly earnings).
Samsung reported that its chip business saw second-quarter operating profit drop 71% year-over-year to 3.4 trillion won, on consolidated revenue of 16.09 trillion won. In the second half of the year, the company expects to continue dealing with market uncertainty, but says demand for chips will increase “on strong seasonality and adoption of higher-density products.” (TechCrunch)
With seemingly numbers dropping across the board, it’s not total unexpected. Phone prices have risen sharply over the past few years, while performance has generally increased. A flagship phone from last year or the year before can still offer strong performance, meaning users are less likely to follow the yearly upgrade cycle.
In addition, with pricing increasing, people aren’t quite so happy to shell out up to $1000 for a new device. With South Korea and Japan enduring a trade dispute, companies such as Samsung can expect to be weathering the storm for some time yet. Whether we’ll see market adaptions such as cheaper technology over time to increase sales, time will tell.
Have you bought a new phone recently? Why or why not? Share your thoughts in the comments below.