Samsung Quarterly Profits Were Halved in Q2

Credit: ShutterstockCredit: ShutterstockSamsung announced yesterday that its quarterly profits declined by 55.6% year-over-year in the second quarter of 2019. That's slightly better than the previous quarter--its profits dropped by 60% in Q1 2019--but it still highlights tech's struggle amid dwindling consumer demand across multiple categories. Samsung blamed poor semiconductor and smartphone sales in particular for its current situation.

This sharp decline in the company's operating profit mostly resulted from lower margins. Samsung reported that its quarterly revenues only dipped 4% year-over-year, from about KRW 58.48 trillion ($49.5 billion) in Q2 2018 to about KRW 56.1 trillion ($47.5 billion) in Q2 2019, while its quarterly operating profit dropped from KRW 14.9 trillion ($12.6 billion) to KRW 6.6 trillion ($5.6 billion) in the same timeframe.

Samsung claimed that demand for its DRAM and NAND products improved in Q2 2019, but not enough to reverse its fortune in the flash market, where it's been struggling for months (Intel was able to reclaim the semiconductor throne earlier this year). Memory prices have been declining the fastest they have in nearly a decade because of weak consumer demand and oversupply issues.

Here's what Samsung told investors it plans to do about that in its earnings report:

  • Memory: Demand to increase as major applications adopt larger-capacity products under strong seasonality; industry uncertainties to persist
  • DRAM: Focus on flexible management of product mix to respond to demand from different applications; enhance technological competitiveness via stable 1ynm ramp up
  • NAND: Strengthen profitability by mass producing 6th generation V-NAND and expanding supply of premium products (such as Enterprise SSDs) based on 5th generation V-NAND
  • S.LSI : Demand for APs, image sensors, DDIs, etc. to increase on seasonality; expand supply of premium products such as 64Mp sensors and EUV 7nm APs
  • Foundry: Strengthen competitiveness of EUV advanced processes by mass producing 6nm EUV chips while completing the development of and infrastructure for 4nm chips
The company's also struggling in the smartphone market. Sales were up in Q2 2019, according to the earnings report, but that was mostly among its non-flagship offerings. Yet, Samsung said that selling a bunch of low-end or mid-tier phones didn't help profitability, "due to intensifying competition in the low-end to mid-range market and an increase in expenses aimed at clearing the inventory of older models."

Samsung's woes are indicative of much of the industry's current struggles. Consumers aren't buying as many high-end components, systems, or smartphones as they used to. That affects Samsung directly because of its smartphone business; it also affects it indirectly because it means other companies aren't necessarily rushing to buy its DRAM, NAND, display panels, or other parts.
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