Samsung Electronics Co., Ltd. South Korea is likely to post its profit in the second quarter of 2019 less than half this week.
Amid the drop in shipments of memory chips to Huawei Corporation (China), the oversupply situation has become more serious.
Analysts expect Samsung Electronics’ second-quarter results to be at its lowest level in nearly three years, and the recovery phase will still require several more quarters, when the oversupply situation does not improve amid the market. Technology growth is slowing down.
Samsung Electronics is the world’s largest supplier of dynamic random access memory DRAM and NAND memory chips, and is also the world’s largest smartphone manufacturer. While Huawei is the world’s second-largest smartphone manufacturer, companies around the world are now forced to restrict business with the group to comply with U.S. trade sanctions.
Jay Kim, an analyst at Sangsangin Investment & Securities, said that when there were not many businesses that could buy chips to replace Huawei, Samsung would be forced to lower prices to boost sales.
The memory chip business generates more than two-thirds of profits for Samsung
The memory chip business generates more than two-thirds of profits for Samsung. Meanwhile, saturation in the smartphone market and a decline in demand from data centers are pushing chip prices down. Analyst Avril Wu of TrendForce technology research center forecast that DRAM prices are unlikely to rebound in the second half of this year. Moreover, Samsung will also have difficulty reducing inventories until the first half of 2020. TrendForce estimates that DRAM prices for the three months to June have dropped by 25%.
Based on estimates by 29 analysts, Refinitiv SmartEstimate expects Samsung Electronics’ operating profit for the second quarter of 2019 to fall 60% to 6,000 billion won (US $ 5.14 billion).
* Source: BizLive