Sagging Smartphone Market Punches Samsung Profits Right In the Chips

Samsung has reported its Q1 net profit and things aren't good for the smartphone and chip giant. Samsung's net profits declined 57% to 5.04 trillion South Korean won ($4.4 billion), a sharp decline from the 11.69 trillion won for the same quarter of last year. Revenue declined sharply from 60.56 trillion won in the same quarter of 2018 to 52.39 trillion won in Q1 2019.

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The massive decline wasn't a surprise to analysts; the prediction was for net profit of 4.9 trillion won and revenue of 52 trillion won for the quarter that wrapped up on March 31. This marks the lowest net profit that Samsung has earned since Q3 2016 when the company was hammered by the Galaxy Note 7 fiasco including fires and multiple recalls.

The weak financials are blamed mostly on a decline in global spending that has significantly impacted demand for its memory chips. As smartphone buyers hold onto devices for longer periods, the demand for new memory chips has sagged. Both Samsung and Apple are in large part to blame for the increased time that consumers are holding onto their smartphones as both firms have pushed the price for smartphones above $1,000 for some flagship devices.

Samsung is also facing a major problem with its much-hyped and costly Galaxy Fold smartphone that suffered from high profile display failures within days of landing in the hands of reviewers around the world. The display failures led Samsung to delay the launch of the device as it investigated the cause. Oddly, Samsung also put pressure on iFixit to remove its teardown of the Galaxy Fold. The Galaxy Fold had been up for preorder when the launch was delayed and the screen issues surfaced. The Fold had completely sold out during the preorder phase, but it's unknown at this time when a revised version of the newly $2,000 smartphone will ship.

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