The global chip market which apparently has softened considerably, after years of booming growth, hit the first-quarter net profits of South Korean electronic giant Samsung Electronics hard. The biggest smartphone and memory chip maker of the world reported a slump in profits for the most recent quarter.

The company reported a 56.9 per cent year-on-year drop in the net that Samsung managed to generate in the January-March period at 5.04 trillion won which is the lowest for any quarter for it since the third quarter of 2016, the company said.

Samsung Electronics is arguably the most important company among the large number of companies under the control of the giant Samsung Group and is also by far the biggest amongst the family-controlled conglomerates. Samsung as a group has considerable influence over the South Korean business and economic scene which is the 11th largest economy of the world. The Samsung group is also very critical for the health of the country’s economy.

In recent years, Samsung Electronics has reported record profits despite a series of setbacks which included the company having to make recalls for its products and the jail term sentencing for its de facto chief.

However the scenario is changing fast now because of a drop in global demand for chips and increase in global supply which is causing a drop in chip prices across the board.

There has also been increasing tough competition from Chinese rivals like Huawei in the smartphone market which has tormented the company. In 2017,  Huawei surpassed Apple to take second place in terms of the number of smartphones shipped in the year. The company is challenging Samsung because it is offering equal quality and features at lower prices.

“Mobile displays suffered slower demand and intensifying competition with LTPS LCDs,” the company said in a statement.

“Large displays also took a hit from a continued decline in LCD panel prices amid weak seasonality.”

After South Korea won the global race to commercially launch the world’s first nationwide 5G networks, Samsung launched its top-end S10 5G smartphone earlier this month.

However the company decided to postpone the launch of its $2,000 foldable smartphone in et United States last week after there were reports of screen problems within days of use in the phones that the company had distributed among reviewers.

Despite the Samsung foldable phone not being the first of its kind to be launched in the market this year, the company was hoping that the model would generate demand as existing customers people upgraded to it and that a sector that has been craving for new innovations for demand growth would be revived.

It should be noted that Samsung is also supplier and screens and memory chips for its own smartphones as well as for those of Apple and provides high end chips for large capacity servers used in cloud companies by companies such as Amazon.

(Adapted from GulfNews.com)