Samsung’s operating profit for the third quarter has dropped by 56%. The company is struggling with decreased demand for memory chips. Analysts, however, believe that the worst could be over for the company and are predicting a turnaround next year. Revenue from the sale of smartphones and parts for rival smartphone markets could help the company offset its losses.
The South Korean company warned investors that it expects Q3 operating profit to drop to $6.5 billion as against $14.7 billion for the same period of 2018. Samsung’s numbers beat analyst estimates who are predicting about $6 billion.
Samsung expects sales to fall to $52 billion, dropping by 5%. The stock closed 2.4% up in Seoul. Samsung’s memory chip business is responsible mainly for reducing profit. The demand for memory chips has been sluggish. Analysts, however, believe that the chip business should pick up due to advances in semiconductor technology. Samsung has made a breakthrough in chip manufacturing using a technique called Extreme Ultraviolet Lithography (EUV).
Samsung also makes components for its rival mobile phone manufacturers. Analysts from Daishin Securities commented that Samsung’s memory chip and display business should get back on track due to increased demand from Apple and Huawei.
Samsung recently released its latest flagship phone – Galaxy Note 10. Sales numbers are encouraging, and this would help the company’s financials.
Samsung has benefited from the decreased sales of Huawei phones. Chinese manufacturer Huawei is the world’s second-largest phone manufacturer. Huawei has been under fire recently when President Trump ordered a ban on all sales of Huawei devices in the United States. Huawei is also the world’s second-largest telecom equipment manufacturer. Huawei was placed on a blacklist by the U.S.in May with allegations of stealing American technology.
These problems have benefitted Samsung, which saw its market share skyrocket to 40% in Europe. This has been its highest market share in five years.