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Samsung profit likely lowest in more than 14 years as chip glut persists
Global Banking & Finance Review®
Company
By Joyce Lee
SEOUL (Reuters) -Samsung Electronics’ June-quarter profit is expected to plunge 96% on-year to the lowest for any quarter in more than 14 years, as a chip glut continues to drive large losses in the tech giant’s cash cow business despite a supply cut.
Operating profit for the world’s biggest maker of memory chips, smartphones and TVs likely fell to 555 billion won ($427 million) in the April-June quarter, according to a Refinitiv SmartEstimate from 27 analysts, weighted toward those who are more consistently accurate.
If so, it would be Samsung’s lowest profit since the fourth quarter of 2008, when Samsung Electronics reported a consolidated operating loss of about 740 billion won. It compares with an operating profit of 14.1 trillion won in the April-June quarter last year.
This is because its chip division, traditionally its biggest earner, likely reported quarterly losses of around 3 trillion to 4 trillion won as memory chip prices fell further and its inventory values were slashed.
Prices of DRAM memory chips – widely used in smartphones, PCs and servers – continued to slide in the quarter, falling about 13% to 18% according to TrendForce, as chip buyers refrained from purchasing new chips and used up inventories.
However, the price decline slowed from previous quarters as Samsung Electronics and memory chip peers cut supply, and is expected to hit bottom around the third quarter, although a substantial recovery might not come until 2024, analysts said.
Despite the current downturn, Samsung is working to increase its share of chip demand from the exploding field of artificial intelligence (AI), such as with high bandwidth memory (HBM) and chip contract manufacturing, they said.
Its mobile business likely reported an operating profit of around 3.3 trillion won, according to an average of forecasts from five analysts, as efforts to cut marketing costs offset a slight drop in smartphone shipments versus the first quarter, when Samsung launched its latest flagship model.
Samsung is expected to unveil its latest foldable smartphones later this month in Seoul, weeks earlier than usual, seen by analysts as a bid to dominate the premium phone market for longer before rival Apple releases its next iPhone.
The tech giant will announce its preliminary second-quarter earnings results on Friday, before reporting full earnings later this month.
($1 = 1,298.7800 won)
(Reporting by Joyce Lee; Editing by Sonali Paul)
Operating profit is the income generated from a company's core business operations, excluding deductions of interest and tax. It reflects the efficiency of the company's operations.
A chip glut refers to an oversupply of semiconductor chips in the market, leading to decreased prices and profitability for manufacturers.
Dynamic Random Access Memory (DRAM) is a type of memory used in computers and devices for temporary data storage, known for its speed and efficiency.
Artificial intelligence (AI) refers to the simulation of human intelligence in machines programmed to think and learn like humans, often used in data processing and automation.
Inventory value is the total worth of a company's inventory at a given time, calculated based on the cost of goods available for sale.
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