Samsung’s Q2 profit likely took a big hit due to poor memory chip sales

Samsung’s smartphones may get a lot of media coverage, but they are not the major contributor to the company’s bottom line. That title has been held by the company’s semiconductor business for many years now. So, when the US government came down heavily on Huawei, more than helping Samsung’s smartphone revenue, the move appears to have harmed the company’s semiconductor business as it counts Huawei as a client.

A report in Reuters says Samsung Electronics’ Q2 profit may be halved due to a substantial drop in memory chip sales. The situation is believed to be further exacerbated by Huawei’s growing woes, resulting in a likely drop in overall quarterly profit when Samsung reports its preliminary earnings on Friday. If the earnings pan out as predicted, it will be the Korean company’s lowest in nearly three years. Analysts believe Samsung will report a 60% drop in April-June operating profit at 6 trillion won ($5.14 billion).

The memory chip market is reeling from oversupply, bringing down the prices in an already slowing market. Analysts believe Samsung’s recovery is at least a few quarters away. Though the Korean tech giant stands to gain in the global smartphone market where Huawei is currently the second largest vendor, the likely gains are no match to the erosion of profits from its semiconductor business which accounts for nearly two-thirds of the company’s overall profit.

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