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Samsung's Q2 2019 profit falls by a staggering 56% after weak memory demand

Analysts expect the memory chip market to recover only in the second half of 2020.

What you need to know

  • Samsung's Q2 2019 profit was 56% lower compared to the same period last year.
  • Drop in demand of memory chips is a major reason behind the massive drop.
  • The company plans to enhance its 5G lineup and introduce more A series phones in the second half of the year.

Samsung, which is currently the world's largest maker of memory chips, has been severely hit by a major decline in the chip market. In its Q2 2019 earnings, the company posted an operating profit of $5.6 billion (6.6 trillion won), which is down by a whopping 56% compared to last year. Consolidated revenue came in at $47.4 billion (56.13 trillion won).

Compared to the first quarter of the year, however, both revenue and operating profit have gone up. Weakness in the memory market was the primary reasons behind the massive plunge. Samsung expects demand for memory chips to grow in the second half of the year but warns volatility in the market is likely to continue.

Samsung's mobile business posted consolidated revenue of $21.86 billion (25.86 trillion won) and operating profit of $1.32 billion (1.56 trillion won) for the quarter. Even though the global smartphone market saw demand decline during the quarter, Samsung's smartphone shipments increased over the previous partner, driven by the success of new Galaxy A series phones such as the Galaxy A50 and A70. However, sales of its flagship Galaxy S10 fell compared to Q1, apparently due to stagnant demand for premium products in the market.

In the third quarter, Samsung says it will focus on launch of the "innovative" Galaxy Note 10 and Galaxy Fold, expanding its 5G smartphone lineup. Buoyed by the success of its latest Galaxy A series phones, the company will be introduce more competitive A series phones to help boost shipments.

The consumer electronics division did quite well in the second quarter, posting $9.36 billion (11.07 trillion won) in consolidated revenue. Samsung is planning to maximize end-year sales of large-screen TVs by "positioning QLED 8K TVs as mainstream TVs." It will also focus on lifestyle products such as Bespoke refrigerators and AirDressers in the second half of the year.

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by Babu Mohan