SAMSUNG – The second-quarter operating profit of Samsung Electronics Co Ltd probably plummeted, according to company forecast.
The company cited the disruptive US-China trade war as the primary reason for the plunge, with the trade dispute adversely affecting the global chip and smartphone markets. However, the company believes the figure will beat analyst expectations thanks to one-time item sales.
Samsung, a South Korean tech giant, is on its way to post year-over-year profit declines. This will come as its third consecutive quarter to post a fall in operating profit.
Chip markets have been under pressure due to a supply glut and US sanctions to Chinese telecom equipment maker Huawei.
The said Chinese tech giant is a key customer for Samsung Electronics.
Rising tariffs hit global demand for electronics, therefore hurting memory chip makers like Samsung and South Korea’s SK Hynix.
South Korea slashed its economic growth target last Wednesday, marking it down to a seven-year low as exports decline.
South Korean tech companies also suffer from Japanese curbs on exports to Seoul of materials in memory chips and phones. This is the latest event in the two Asian country’s beef over Japan’s use of wartime labor.
According to one analyst, Samsung’s recovery may come slowly, with intensifying US-China trade war and Japanese export curbs.
According to its guidance, operating profit probably fell 56% to 6.5 trillion won. That’s equal to $5.6 billion.
Revenue probably fell 4.2% from a year ago, clocking in at 56 trillion won.
Meanwhile, one-off gains in terms of display sales were also in the operating profit. This division supplies display panels to Apple Inc. Samsung didn’t elaborate further on this matter.
Additionally, the company received reimbursement worth about 800 billion won for display panels that Apple bought. The reimbursement comes as the iPhone maker failed to meet sales target the two companies agreed on.
Samsung stocks were 1% lower versus the nearly flat broader market movement.
LG Electronics, another South Korean smartphone maker, said that its second-quarter operating profit probably fell 15.4% from a year-ago period.
For the April-June quarter, LG forecasts profit of 652.2 billion won.
Elsewhere, US stock futures crept lower, with investors waiting for the monthly US jobs data. The report could provide clues on the Federal Reserve’s move on interest rates.
According to a survey, non-farm payrolls data from the US Labor Department will probably show an increase by 160,000 jobs in June. In May, jobs increased by only 75,000.