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Analyst: Samsung's Operating Profit Plunge Could Have Been Worse

Jayson Derrick

South Korea's Samsung Electronics Co said Friday its operating profit fell 56% year-over-year in the second quarter to 6.5 trillion Korean won ($5.5 billion) as memory chips continue to experience weakness in both price and demand, according to CNBC.

What Happened

Analysts were modeling for Samsung to report an operating profit of around 6 trillion won, meaning the earnings report wasn't as bad as it could have been, Constellation Research's Ray Wang said on CNBC's "Street Signs."

The numbers are still "bad in the big scheme of things," especially considering global challenges to supply chains in a "new era of trade," he said. 

Why It's Important

Ironically, the same "new era of trade" could also benefit Samsung's flagship S10 smartphone, as it could gain market share that China's Huawei loses, Wang said. This could translate to a net benefit of 32 million smartphone shipments for the full year, he said. 

The global glut in chips allows Samsung to "buy some time," Wang said. 

What's Next

Investors should expect global governments to continue exerting "economic pressure on political issues" going forward, Wang said. One of the more pressing issues impacting Samsung is Japan's move Thursday to curb technology exports to South Korea that are needed to manufacturer semiconductors and display screens, he said. 

"I think we are going to see a lot of this and we are going to see a lot of pressure on companies to increase their R&D investments to address these supply chain risks." 

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Photo courtesy of Samsung.

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