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Samsung expects second-quarter profits to plunge 56%

Electronics giant likely hurting from smartphone market slowdown and US-China trade war tensions.

Samsung smartphone sales likely suffered from global market slowdown.
Angela Lang/CNET

Samsung expects a steep plunge in its second-quarter operating profit amid uncertainty in the global smartphone and chip markets and ongoing tensions related to the US-China trade war. The South Korean electronics giant said Thursday it expects to record an operating profit for the three-month period ended June 30 of 6.5 trillion won ($5.6 billion), a 56% decline from the year-ago period.

The company is also expected to record revenue of 56 trillion won ($47 billion), a decline of nearly 10% from a year earlier. Samsung said it benefited from a one-time gain related to its display business but didn't elaborate. The earnings guidance, released Thursday ahead of full earnings later this month, didn't provide specific divisional results.

Samsung appears to be suffering the fallout from President Donald Trump's escalating trade war with China. Beijing said in May it would impose a 25% tariff on US goods in retaliation for Trump's plan to increase tariffs on goods imported from China.

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A study, released in June by the Consumer Technology Association, highlighted how the prices of phones, laptops, tablets, video game consoles and toy drones from China would rise significantly as a result of the potential tariffs. The price of phones imported from China, for example, would rise by 22%, while overall US prices for phones would increase by 14%.

Samsung has also likely been stung by an ongoing slowdown in the smartphone market. It's become harder for handset vendors to make huge changes in their devices and differentiate from one another. Prices for the latest and greatest phones have actually increased at the same time US carriers have gotten rid of subsidies. All of that has meant people are waiting longer to upgrade.

The quarter should have included revenue from sales of the Galaxy Fold, the first foldable phone to hit the market. But screen-damaging design flaws caused the $1,980 phone to be delayed for two months and counting.