The company said on Friday that it assumed its second-quarter operating profit to fall more than 50 percent, to 6.5 trillion won, or about $5.6 billion. It managed to beat analysts’ expectations only because of a onetime gain in its display business.

 

Samsung’s disclosure on Friday highlighted the troubles that an escalating series of trade fights are causing on the global economy, mainly for huge companies that sell finished products as well as components internationally.

 

Samsung, a top producer of the components in an array of gadgets, was already experiencing a slowdown in sales of smartphones and other technology products. It has been especially hurt by a glut of memory chips.

 

The persistent trade dispute between the United States and China has made things a whole lot worse for the company. The Trump administration’s restrictions on sales to Huawei, a major buyer of Samsung memory chips, has minimized demand for the company’s chips and forced it to cut prices. Although President Trump lately said he would relax some of the restrictions, it is still unclear how far the easing will go.

 

That decline in Samsung’s memory-chip business will certainly be greater than whatever gains its smartphone division may reap from any drop in sales of Huawei’s competing products. Samsung has also been forced to contend with added costs resulting from import tariffs imposed on washing machines by the Trump administration in a move meant to protect American competitors like Whirlpool.

 

Other trade fights could cause more pain in the short term. Japan a short while ago imposed export limits on materials used to make displays and computer in South Korea, which are estimated to hurt Samsung and a top rival, SK Hynix.

 

And a more diverse economic downturn worldwide could reduce demand for Samsung’s array of products, which also include televisions and audio speakers.

 

Source: TRONSERVE