Samsung's chip business was hit hard by U.S. ban on Huawei
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According to Reuters, Samsung Electronics is expected to release a preliminary look at its second-quarter earnings report this coming Friday. The numbers should show that the South Korean manufacturer was negatively affected by the U.S. ban that prevented Huawei from obtaining U.S. parts and software. Samsung's shipments of memory chips to Huawei were down sharply during the three month period that covers April through June. This has led to a backup in supplies of Sammy's DRAM and NAND chips forcing the manufacturer to cut prices in order to move its inventory. Since 67% of Samsung's profit comes from selling chips, Huawei's purchases have a lot of influence over how well the manufacturer does in any given quarter.
"How much Huawei will use chips ahead is definitely a swing factor in prices. When there's not many players that can buy chips instead of Huawei, then Samsung has to cut prices to sell them."-Jay Kim, analyst, Sangsangin Investment & Securities
Samsung has its own trade issues that could cut its production of smartphone displays and chips
DRAM chip pricing will probably not rebound over the remainder of the year predicts TrendForce researcher Avril Wu. TrendForce says that pricing for these chips declined by 25% over the second quarter and predicts a further decline of 15% to 20% during the current quarter that started on Monday and runs through the end of September. Micron Technologies, a U.S. competitor to Samsung in the memory chip business, says that demand for these chips will pick up in the second half of the year, which should bode well for firmer prices later in 2019. But TrendForce's Wu says that Samsung won't be able to clear its inventory of DRAM chips until the first half of next year.

Samsung's 12GB LPDDR4 DRAM chip
Samsung could also find itself having issues obtaining important supplies needed to produce chips and smartphone displays. Materials that the company sources from Japan to help produce these parts, fluorinated polyimide and resist and high-purity hydrogen fluoride (HF), will require permission from the Japanese government to ship to South Korea starting tomorrow. Obtaining that permission could take as long as 90 days each time it is requested. The countries are arguing over a court ruling made by the South Korean Supreme Court last October. The court ordered that Japan compensate South Koreans who were forced to work for Nippon Steel during World War II. As a result, Samsung could have problems producing enough OLED panels for Apple and its other customers. And the company could lose some memory chip business to rivals as a result.
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