Samsung quarterly profits more than halved in June quarter

Samsung Electronics, South Korea's largest business saw its quarterly profit more than cut in half after a world-wide industry downturn plus trade tensions cut demand both for its chips and high-end smartphones.

The June quarter results

The fall of 56 percent in operating income was actually less than expected as there was a one time gain from one customer that could have been more than $800 million. The total revenue was about $5.6 billion. The company does not release net income figures or break out the performance of different divisions until the final results which will be released at the end of this month. Samsung shares have fallen 0.8 percent on the Seoul market.

Problems faced by Samsung

Samsung is the world largest producer of semiconductors, mobile phones and smartphone screens. However, demand appears to have peaked and may turn down as the global economy slows. The memory chip business has been hard hit since Trump tariffs took effect just last May. Concern over Samsung's biggest cash cow grew just this week as Japan has placed export restrictions on materials Samsung needs for its display and chip production.

Kim Sunwoo a Meritz Securities analyst said of the second half period: “Considering the structural downturn in memory prices and the mobile business, it’s unlikely Samsung would exceed earnings estimates. As uncertainty over earnings have expanded on macro issues and around each division, the possibility of a special shareholder return plan has decreased significantly.”

The trade war between the US and China has created an unpredictable future. The US and China are two countries where Samsung generates much of its revenue. There has been a downturn in the chip industry as demand tapers off. Micron Technology the largest US maker of memory chips said that it is intending to reduce its spending in 2020, and will also idle five percent of its memory chips production in the last quarter.

Prices for memory falling

In the second quarter alone prices for 32-gigabite DRAM server modules dropped 19.3 percent when compared to the previous quarter. Prices for 128 gigabite MLC flash memory chips fell five percent. DRAM price drops are expected to widen up to 15 percent during this quarter and as much as 10 percent during the fourth quarter according to TrendForce estimates.

Song Myung-sup an analyst at HI Investment and Securities said: “Memory prices are likely to keep sliding due to the ongoing trade war. Samsung’s smartphone business will start to benefit from the U.S. ban on Huawei.”

Chinese customers will place more orders later in the year as they will not be receiving as many products from the US, and prices will be higher for US products.

Previously published in the Digital Journal

Smartwatch sales in the US were up more than sixty percent last year

Smartwatch sales in the US were up more than 60 percent in 2018. As the wearables market begins to mature more people are buying smartwatches. The data is provided by the NPD Group. Total sales last year were nearly $5 billion.

Market dominated by a few firms

Apple, Samsung, and Fitbit together make up 88 percent of Smartwatch sales according to NPD data during the time NPD was monitoring them. This is a particularly bad figure for Google as none of them make the company's Wear OS devices.

Smartwatch market is just starting rapid growth

The NPD data showed that owners of smarwatches grew from 12 percent in 2017 to 16 percent in 2018. Most of the increase was driven by younger buyers as between the age of 18 to 34 almost a quarter of the group own a smartwatch. The growth is also driven by the fact that many smartwatches now have functions that mimic those of health and fitness wearables. For example Apple has added fall detection to its smart watches. Samsung's latest Galaxy Watch model has added fitness and sleep tracking features.

Google buys smartwatch tech from Fossil

The new tech will make its way into Google's Wear OS watches. A recent article notes: "Google and watchmaker Fossil Group today announced an agreement for the search giant to acquire some of Fossil’s smartwatch technology and members of the research and development division responsible for creating it.

The deal is worth roughly $40 million, and under the current terms Fossil will transfer a “portion” of its R&D team, the portion directly responsible for the intellectual property being sold, over to Google. As a result, Google will now have a dedicated team with hardware experience working internally on its WearOS software platform and potentially on new smartwatch designs as well." Reports indicate the technology is health related.

Previously published in Digital Journal

New Samsung Connect Tag uses narrowband technology

Samsung claims that its new Connect Tag will be the first mobile product to use narrowband network technology (NB-IoT) . The Connect Tag will provide location information using GPS, Wi-Fi based positioning and cell ID for location tracking.

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Narrowband networks connect Internet of Things(IoT) devices through cellular communication bands. Greater communication is becoming key, as experts estimate that by 2020 the IoT will contain about 30 billion objects.

What will work on the narrowband?

The narrowband networks are meant for devices that use small amounts of data and power and they provide the capability to securely connect to the Internet for location services. The Connect Tag has a three-coloured LED and is claimed to have a battery life of seveʼn days before it needs to be recharged. As of now, the device will only work with Android devices.

The tag can be connected to a child's backpack, a dog's collar, or to personal belongings. If you are one of those people who are always losing keys or a purse, you can attach a Connect Tag to them. The Connect Tag has some similarities to Bluetooth trackers such as Tile, although Tile has a much longer battery life.

The Connect Tag has a geofence feature that will notify you when your child, pet, or even your wallet moves beyond the limits set by you. The tag can be linked with other Samsung SmartThings or smart devices within your house.

For example the device can trigger turning on the light when a user enters a room, or it can notify you when your child enters school grounds. There is a function that allows you to request the tag's location. You can set up location alerts that would periodically tell you where your child or pet is.

The tag is quite small at just 1.19 cm thick and 4.21 cm wide. It is dust and water proof. The Connect Tag will be sold only in South Korea initially but will be rolled out in other countries in the months thereafter. No price has been announced as yet. As noted on the appended video, the Connect Tag could also be helpful if you constantly lose track of where you car is in a parking lot.

Apple and Samsung suits about restricting competition

The constant refrain from business is that competition is great and the lifeblood of capitalism. Yet the expensive court cases between Samsung and Apple show the opposite. Global capitalism is now to a considerable extent all about patents.

Patents give corporations monopoly rights. These rights prevent competitors from producing products at a lower cost that contain patented features. Patents provide corporations with cash cows that enable them to milk consumers by charging prices that would not exist in a truly competitive market structure.

Even free trade deals are not so much about competition as about restricting competition. Part and parcel of free trade deals are TRIPS(Trade Related Aspects of Intellectual Property Rights). Part of the provisions on patents reads as follows:

Patents must be granted for "inventions" in all "fields of technology" provided they meet all other patentability requirements (although exceptions for certain public interests are allowed (Art. 27.2 and 27.3)[4] and must be enforceable for at least 20 years (Art 33).

In order to enter a so-called Free Trade agreement a country must grant corporations monopoly rights for at least 20 years and allow patents in all fields of technology. It is in this context that the dispute between Apple and Samsung should be viewed. The suit is about the rights of Samsung and Apple to sell products to you the consumer in a manner that restricts competition. The result is that prices for their products will be much higher than if they were being produced in a market without patents. For some reason when business people talk about government intervention in the market, patents are never mentioned. Without governments passing laws to give these rights there would be no patents.

We now have the results of two cases in which Apple and Samsung sued on the basis of patent infringement. In South Korea where Samsung is headquartered the court ruled against Apple's position that Samsung had copied the design of the iPhone. The court also ruled that Apple had infringed two Samsung patents related to mobile broadcasting technology. However, the court also ruled that Samsung had violated an Apple patent. The judge ruled that many of Apple's claims of design patents were not valid since they had already appeared in inventions of Japanese and European countries. As a result of the court decision Samsung will be banned from selling 10 of its products in South Korea and Apple four products.The Korean judge's views on Apple design patents were quite different than those of a U.S. jury.

The U.S. trial took place in San Jose California just a few miles from the headquarters of Apple. The jury found that Samsung had copied key features of the iPhone and iPad and Apple was awarded $1.051 billion in damages. The decision will mean that Apple has successfully limited Samsung's competitive challenge and that sales of some key Samsung products will be banned. The free market triumphs again.

Apple is already the biggest company by market value in history. With the money from the Samsung settlement Apple can file more suits against other companies to further boost their economic rents due to patent monopolies. The result of these trials confirm the importance of monopoly power in modern global capitalism.The costs of ensuring the continued triumph of these powers will be passed on to consumers in the price of Apple and Samsung products.