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Samsung Q2 profit plunges 56% as chip troubles persist

Sluggish smartphone demand pulls down memory prices after 2-year boom

The cyclical memory chip industry finds itself in a downturn as demand for gadgets slows.   © Reuters

SEOUL (Reuters) -- Samsung Electronics Co Ltd posted a 56% drop in second-quarter operating profit on Wednesday, hit by declines in memory chip prices amid oversupply.

Operating profit was 6.6 trillion won ($5.6 billion) in the second quarter, in line with 6.5 trillion won the company had estimated earlier this month.

The notoriously cyclical memory chip industry is in the midst of a downturn after a two-year boom, as slowing demand for gadgets such as smartphones pulls down chip prices.

South Korea's chip giants also have been hit by Japanese curbs on the export of key materials, the latest salvo in a diplomatic row between Seoul and Tokyo over wartime forced labour.

Samsung said in a statement memory chip demand was expected to grow in the second half, backed by its server DRAM customers resuming purchases.

Last week, Samsung's South Korean chip rival SK Hynix said it would cut investment and production to shore up a nascent recovery in chip demand.

The chip business was still Samsung's top earner but it reported a steep fall of 71% to 3.4 trillion won operating profit, from 11.6 trillion won in the same period a year ago.

Its mobile business booked 1.6 trillion won in quarterly profit, down 42% from a year ago, Samsung said, weighed by slower sales of flagship models and increased marketing expense.

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