Samsung Q2 operating profit halved amid sluggish global chip demand

02, Aug. 2019

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SEOUL, NNA - Samsung Electronics Co. on Wednesday reported a 56 percent drop in operating profit to 6.6 trillion won ($5.5 billion) in the second quarter ended June 30, compared to the same period last year.

The South Korean IT giant blamed the downturn in the memory chip market and inventory adjustments by major datacenter customers.

The company’s semiconductor business alone posted an operating profit of 3.4 trillion won, one-quarter of the record-high profit seen in Q3 2018. However, unlike SK Hynix Inc., the world’s second-largest memory chip producer, Samsung said it has no plans to cut production.

“The company is not considering any intentional reduction in wafer output. Work to improve efficiency of production lines is underway flexibly in response to demand,” said Samsung Vice President Jeon Se-won in a conference call.

Akira Minamikawa, an analyst at HIS Markit, told NNA that Samsung would only reduce production when chemical imports from Japanese suppliers are delayed due to Japan’s new trade restrictions.

Samsung relies on Japanese companies for 80 to 90 percent of its materials for making chips.

Last week, SK Hynix said it would turn part of its DRAM fabrication line in Incheon, Gyeonggi Province, over to non-memory CMOS image sensor production, and reduce NAND wafer output by more than 15 percent this year, compared to its earlier planned cut of 10 percent.

“Samsung is more bullish toward the market than SK,” said Roh Keun-chang, an analyst at HMC Investment Securities.

The company’s mobile division, the biggest earner after semiconductors, was also weighed down by slower sales of flagship models amid stagnant demand for premium products.