Samsung profit slips on coronavirus, more falls forecast

Samsung profit slips on coronavirus, more falls forecast
Samsung expects weaker results in the next three months, adding that “uncertainties driven by COVID-19 will persist” into the second half. (AP)
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Updated 29 April 2020

Samsung profit slips on coronavirus, more falls forecast

Samsung profit slips on coronavirus, more falls forecast
  • Net profits in the January-to-March period were $4 billion, down 3.1 percent from a year earlier

SEOUL: The world’s biggest smartphone maker, Samsung Electronics, said Wednesday that net profits in the first quarter were only slightly impacted by the coronavirus pandemic but warned of further falls to come as demand is “significantly” hit by the disease.
It reported on Wednesday that net profits fell slightly in the first quarter as the coronavirus pandemic dampened consumer demand, but warned of further falls to come.
Net profits in the January-to-March period were $4 billion, down 3.1 percent from a year earlier, the company said in a statement.
The January-March performance was “partially due to effects of COVID-19,” Samsung said in a statement.
And it said it expects weaker results in the next three months, adding that “uncertainties driven by COVID-19 will persist” into the second half.
The firm is the flagship subsidiary of the giant Samsung Group, by far the largest of the family-controlled conglomerates known as “chaebols” that dominate business in the world’s 12th-largest economy.
The figures come as the coronavirus pandemic wreaks havoc across the world economy — earlier this month Samsung had operations suspended at 11 overseas assembly lines — with expectations rife of a looming global recession.
In the second quarter, it warned: “Overall earnings are likely to decline from the previous quarter because COVID-19 will significantly impact demand for several of its core products.”
Memory demand “is expected to remain robust for servers and PCs as more people work from home,” it said.
But “sales and profits of set products business, including smartphones and TVs, are expected to decline significantly as COVID-19 affects demand and leads to store and plant closures globally.”
Woody Oh, a researcher at Strategy Analytics, said the first-quarter results showed only “a slight impact” from the virus outbreak, which emerged in China and spread to the US, Europe and India — Samsung’s key markets.
“But the real impact will show in the second quarter,” he said, adding almost all companies will report their worst results in April-June as the effects of the pandemic become clear.
Samsung had pinned its hopes for 2020 on a rollout of its new 5G and premium smartphones including its latest folding Galaxy Z flip phone.
“While a contraction of the global smartphone market is expected as a result of the COVID-19 outbreak, demand for 5G smartphones is forecast to grow,” DJ Koh, president of Samsung’s mobile division told the firm’s shareholder meeting last month.
Global smartphone sales dropped 14 percent year-on-year in February, according to the latest data from market researcher Counterpoint Research, although Samsung’s sales remained stable as it has limited exposure to the heavily hit Chinese market.
A report by market researcher TrendForce this month showed Samsung’s chip business may take a hit in the second half from shipment disruptions caused by virus lockdowns.
“Some of Samsung’s back-end server DRAM packaging operations are based in Luzon, the Philippines. Therefore, the continued quarantine of Luzon may affect the shipment schedule of Samsung’s server DRAM modules,” it said.
Overall, the Taiwan-based market researcher said it expects the rebound of memory chip prices to be “flattened” as the coronavirus pandemic dampens demand from the latter half of the year.
Adding to Samsung Electronics’ challenges, its vice chairman and de facto leader Lee Jae-yong is currently being re-tried over a sprawling corruption scandal that could see him return to prison.
He is not being held in custody during the proceedings, but a guilty verdict could deprive the firm of its top decision-maker.


France wants end to US-Europe trade spat

France wants end to US-Europe trade spat
Updated 31 min 28 sec ago

France wants end to US-Europe trade spat

France wants end to US-Europe trade spat
  • All eyes on President-elect Biden to resolve disputes between partners

PARIS: The EU and the incoming administration of US President-elect Joe Biden should suspend a trade dispute to give themselves time to find common ground, France’s foreign minister said in remarks published on Sunday.

“The issue that’s poisoning everyone is that of the price escalation and taxes on steel, digital technology and Airbus,” Jean-Yves Le Drian told Le Journal du Dimanche in an interview.

He said he hoped the sides could find a way to settle the dispute. “It may take time, but in the meantime, we can always order a moratorium,” he added.

At the end of December the US moved to boost tariffs on French and German aircraft parts in the Boeing-Airbus subsidy dispute, but the bloc decided to hold off on retaliation for now.

The EU is planning to present a World Trade Organization (WTO) reform proposal in February and is willing to consider reforms to restrain the judicial authority of the WTO’s dispute-settlement body.

The US has for years complained that the WTO Appellate Body makes unjustified new trade rules in its decisions and has blocked the appointment of new judges to stop this, rendering the body inoperable.

The Trump administration, which leaves office on Wednesday, had threatened to impose tariffs on French cosmetics, handbags and other goods in retaliation for France’s digital services tax, which it said discriminated against US tech firms.

Overturning decades of free trade consensus was a central part of Trump’s “America First” agenda. In 2018, declaring that “trade wars are good, and easy to win,” he shocked allies by imposing tariffs on imported steel and aluminum from most of the world.

While Trump later dropped tariffs against Australia, Japan, Brazil and South Korea in return for concessions, he kept them in place against more than $7 billion worth of EU metal. The bloc retaliated with tariffs on more than $3 billion worth of US goods, from orange juice and blue jeans to Harley Davidson bikes, and took its case to the WTO.

While Biden promises to be more predictable than Trump, he is not expected to lift the steel tariffs immediately. Even if he wants to, he could run into reluctance from producers in “rust belt” states such as Michigan and Pennsylvania that secured his election win.

Hosuk Lee-Makiyama, director of trade think tank ECIPE, said the US was unlikely to award Europe a “free pass,” noting that countries that had offered concessions to have their tariffs lifted could complain if Europe won better treatment.

Resolving future trade disputes could become easier, if Biden reverses Trump policy that paralyzed the WTO by blocking the appointment of judges to its appellate body.