We have known for a while that Samsung is looking to outsource its production plants to ensure profits from its chip manufacturing business. At the moment, Intel is reportedly looking to use Samsung’s Foundry to increase chip productions as Intel went through majority of 2018 with supply shortage of processors. However, it seems that the deals won’t yield significant results for Samsung as the company’s Q2 profit may be halved due to a substantial drop in memory chip sales during the quarter.
According to a report from Reuters, Samsung is set to reduce its shipment goals following Huawei’s recent struggles. After the Chinese smartphone giant found itself in the United States Entity list, the company was forced to reconsider its goal of becoming the biggest smartphone manufacturer in the world. While reports at the time claimed that Huawei reduced its smartphone productions, company’s executives denied the claims saying the company’s productions are going as usual. However, shortly afterwards, the company delayed the release of its upcoming Huawei Mate X. Moreover, Huawei confirmed few years earlier that it will ship significantly smaller number of smartphones than previously targeted for the current fiscal year. As Huawei is one of Samsung’s biggest customers, it’s not surprising to see Samsung’s lackluster profits.
At the moment, Samsung is likely to announce a significant drop in its quarterly profit when the company reveals its quarterly earnings later on Friday. Reuters claimed that the company might experience as much as 60 percent drop in April-June with operating profit at 6 trillion won ($5.14 billion). If the figure turns out to be accurate, then it will mark Samsung’s lowest quarterly earnings in three years.
Although it might be surprising, the memory chip market is currently going through oversupply as demands for smartphones have started to slow down. Consequently, prices of the chips have dropped significantly over last few months. As a result, analysts have predicted that Samsung might need few more quarters to get back on the right track. However, Huawei’s smartphone business strategies going forward will play a key role in determining if Samsung can bounce back from the ongoing shipment problem anytime soon. Although Samsung is expected to turn huge profit from the upcoming release of Galaxy Note 10, the upcoming smartphone won’t help the company significantly as the chip manufacturing business accounts for roughly two-thirds of Samsung’s overall profit.