Mobile phone and consumer electronics manufacturer Samsung has warned of upcoming ‘challenges’ as its second quarter sees profits take a tumble due to problems within its chip business.
Year-on-year figures show a drop in operating profit to the tune of 56% for the South Korean firm, with operating profits posted at £4.6bn for the three months leading up to June. This was down from the £10.3bn posted during the same period last year.
However, despite the slowdown in profits, the results were in line with Samsung’s forecast for the period.
Samsung, who are the world’s largest manufacturer of memory chips and smartphones, released a statement explaining that “despite a limited recovery in demand” prices continue to fall in the memory chip market.
The company says that it is “facing challenges from uncertainties not only in business areas but also from changes in the global macroeconomic environment.”
A number of trade rows between various countries have been cited as the cause for the drop in profits. Firstly the US-China trade war, which has had an effect on the entire industry. And secondly, a separate set of issues resulting from disagreements between Seoul and Tokyo.
Certain industrial materials that are required for the manufacture of semiconductors and displays had been subject to export limitations by Japan – potentially affecting Samsung’s earnings in the long run.
To offset the slowdown in profits, Samsung are set to focus on the launch of new product lines in the third quarter, which include it’s new offering to the folding smartphone market.
The launch of Samsung’s folding smartphone had been delayed due to issues with screens being too fragile. The company said that the Galaxy Fold is set to be released in September once the design faults have been dealt with.
In other news, Samsung’s main rival fared slightly better over the third quarter of the year. Apple posted a small gain in sales, however the sales of its flagship iPhone did take a tumble – down by $741mn on this time last year.
Higher revenues from its other services – such as the sale of software and music – helped to boost sales by 1% overall, and the company also managed to scrape back some of the sales that it was previously losing to China.
Sales rose to $53.8bn (£44.3bn), but net profit did take a hit of around 13%, down to just $10bn. The figures outperformed many estimates from Wall Street, and as a result Apple’s share price jumped 3.5% to $216.10 in after-hours trading.
The figures posted by Apple reveal a changing landscape for its smartphone business. Sales of the company’s flagship product, the iPhone, represented less than half of the company’s overall sales for the first time since 2012.
Sales in China fell slightly by 4% to $9.16bn – following a drop of around 22% in the previous quarter. The decline in sales has been put down to the exchange rate making the iPhone relatively expensive for Chinese consumers.
For the final three months of the financial year, Apple forecast an increase in sales from $53.8bn to over $61bn.