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Samsung expects steep drop in Q3 profits, but it's better than feared

The company didn't say what's impacting its results, but it's likely being hurt by falling chip and phone demand.

Samsung's counting on its Galaxy Fold to be the future of smartphones.
Angela Lang/CNET

Samsung's being hit hard by a slowdown in tech.

The company on Monday projected a 56% drop in third-quarter operating profit to about 7.7 trillion won ($6.4 billion). It also said its revenue slid 5.3% to 62 trillion won ($51.8 billion). Both amounts are slightly better than what analysts expected, according to Thomson Reuters, but they mark a sharp reversal from the same period a year ago -- Samsung's best ever. 

Samsung didn't say what impacted its results, but it's likely being hurt by a declining prices for its chips, as well as weakness in the phone market. The company will report its final results later this month. 

In the third quarter a year ago, Samsung reported an all-time record profit as it benefited from strong demand for its memory chips and other components. Samsung not only uses processors it manufactures in its own devices but also sells them to customers like Apple.

Samsung is best known as the world's biggest phone and TV maker, but it also sells more memory chips than any other company on the planet. It generates more revenue from semiconductors than any other vendor, including the former long-term leader, Intel. When prices and demand for chips fall, Samsung takes a hit.

At the same time, it's struggling to get people to buy pricey phones, a problem experienced by Apple and other rivals on the market. It has 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. 

Samsung has been counting on its less expensive handsets, specifically its A-Series devices, to get consumers shopping again. It's unlikely the new Galaxy Fold, which starts at $1,980, will boost its financial results. But Samsung sees the foldable as the future of smartphones.