The Huawei Ban Will Cut Samsung's Quarterly Profit In Half

The Huawei ban is having a big affect on companies that are not Huawei too. And Samsung might be the one hit the hardest. During the Huawei ban, Samsung shipped less DRAM and NAND chips to Huawei. This was a part of the company that was already making very little profit margin. Meaning that its profit will likely be cut in half for the second quarter earnings.

Samsung is the world's biggest supplier of memory chips - both DRAM and NAND - which are used in just about every computing device that you can think of. From laptops to smartphones and everything in between. Not shipping these chips to Huawei might not seem like that big of a deal. But one has to remember how large Huawei really is, particularly in the smartphone space. We're talking about the number two smartphone maker (prior to the ban), and if Samsung has to stop shipping them chips, it's going to put a big "chip" in their profits.

While Huawei's ban has been lifted, sort of, the future still remains bleak for Huawei and Samsung. As analyst Jay Kim from Sangsangin Investment & Securities noted, "how much Huawei will use chips ahead is definitely a swing factor in prices." Basically saying that if Huawei can't buy chips from Samsung, it's going to need to cut prices to sell them. For Samsung, Huawei is likely one of its biggest, if not the biggest, customer.

For Samsung, this would be the lowest quarterly result in about three years. Analysts still expect that an earnings recovery is a few quarters away, and the Huawei ban is not helping the South Korean firm get closer to recovery.

While Samsung is shipping less chips to Huawei, it does stand to benefit from the ban that the Trump Administration enforced on the Chinese firm. After the company was put on the Entity List, many started selling their smartphones, and looking elsewhere. What's going to be the alternative to Huawei? Likely Samsung. It already has phones at just about every price range already.

Huawei is said to be taking a 40-percent drop in international sales of its smartphones. Samsung and Apple will likely be the ones taking those customers away from Huawei. Despite that big drop, China is still supporting Huawei pretty heavily, which is keeping it at the number two spot, for now.

Samsung isn't the only company that this ban is hurting though. Basically any company that does business with Huawei. Whether that's Google, Microsoft, Qualcomm, Intel, Micron, or someone else. Huawei is such a major player in the mobile space, that if any of these companies are forced to stop doing business with them, it would affect their profit and revenue numbers pretty dramatically.

The second quarter just ended last week, so we will likely be hearing from some other Huawei partners how this ban has affected them in the second quarter - mostly through the end of May and all of June. But Samsung might be hit the most, considering all the parts that Huawei uses from Samsung's supply chain.

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Alexander Maxham

Head Editor
Alex has written for Androidheadlines since 2012 as Editor of the site and traveled the World to many of the biggest Smartphone and Technology events. Alex has a background in Technology and IT and Deep Passion for Everything Android and Google. His specialties lay in Smartphones of all budgets, Accessories, Home Automation and more. Contact him at [email protected]