Trade war causes Samsung profit to halve

Samsung is expecting profits to drop by 56% in the second quarter

Samsung is suffering from the trade war between the United States and China: for the third quarter in a row, the smartphone producer predicts lower profits. Fortunately, the decrease is less dramatic than initially feared.

 

Victim of political tension

The second quarter is not looking very good for Samsung, as the American boycott of Chinese Huawei has turned out to be a thorn in Samsung’s eye. After all, Huawei is one of Samsung’s biggest clients. Trouble between Japan and Korea has also impacted the quarterly figures, which will be revealed at the end of July. Korea has not quite let go of Japan’s past actions in the war and still obstructs the import of Japanese materials, used in memory cards and smartphones. As a result, prices go up, which in turn has a negative effect on sales figures.

 

Samsung is expecting operational profits in the period from April to June to be at least 56 % lower, ending at an estimated sum of 6.5 trillion won (about 5 billion euros). Turnover is expected to drop by 4.2 % to 56 trillion won (about 42 billion euros).

 

A stroke of luck: Apple has to pay too

Still, the predictions are looking better than analysts had expected: so far, they had assumed operational profit would be limited to 6 trillion won. The stroke of luck comes from the department that manufactures displays for Apple, amongst others. Since Apple did not reach an earlier sales target – and therefore bought fewer screens than they had promised – they were forced to pay 800 billion won (6 million euros) to their supplier.

 

Samsung’s competitor LG (also Korean) is experiencing similar difficulties, according to Reuters. LG is expecting a profit drop of 15.4 % compared to the year before, leading to a predicted quarterly profit figure of 652.2 billion won (500 million euros).