Samsung continues tough year with expectations of halved Q3 profits

Samsung's third quarter profits dropped 56% from the previous year due to continued lowered demand for memory chips, but the Galaxy Note 10 is expected to take the mobile business out of its slump.

Samsung Electronics expects third quarter operating profits of 7.7 trillion won and revenue of 62 trillion won, the conglomerate announced in its preliminary earnings guidance on Tuesday.

This would be a 56% drop for its profits compared to a year ago, and would also be a 5.3% fall in revenue.

Samsung saw its second quarter profits halved earlier this year, warning at the time that there would be persistent uncertainties ahead.

This is a stark contrast to last year when Samsung posted its highest-ever quarterly profit in the third quarter which was largely thanks to unprecedented demand for memory chips.

But since the fourth quarter, prices and demand for memory have nosedived and are yet to return to an upward trajectory.

However, Samsung's third quarter operating profits and revenue are expected to rise 16.7% and 10.5%, respectively, from the previous quarter, likely a direct boost from the launch of the Galaxy Note 10 in August.

The company's mobile business posted an operating profit of 1.56 trillion won in the second quarter, but analysts in South Korea expect it to hit 2 trillion won for the third quarter thanks to the flagship launch.

The mobile business is currently attempting to reduce costs in its low to mid-tier smartphones, having shut down the last of its factories in China. In the place of factories, Samsung will rely on local original device makers to develop and produce their devices instead.

Meanwhile, compatriot LG Electronics is expecting operating profits of 781 billion won and revenues of 15.7 trillion won, a rise of 4.3% and 1.8% from a year ago, respectively.

LG's home appliance business is expected to contribute the lion's share of the company's profits and revenue yet again, while the mobile business is likely to report a significant reduction in its losses despite it being the main thorn in its overall profit for years. LG transferred its phone production from South Korea to Vietnam earlier this year in a bid to better control costs.

Both Samsung and LG will release their full earnings report at the end of the month.

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