New Delhi: Samsung Electronics said on Friday that its second-quarter operating profit likely fell as much as 96 percent from a year ago, as a chip oversupply and sluggish demand persist. The world’s largest maker of memory chips and smartphones estimated a profit of 600 billion won ($461.2 million) in the April-June period, down significantly from the 14.1 trillion won reported a year earlier.
It marked the worst quarterly profit in 14 years since the first quarter of 2009 when the South Korean tech giant reported 590 billion won in operating profit, Yonhap news agency reported.
Sales likely fell 22.3 percent to 60 trillion won from 77.2 trillion won a year earlier, the company said in a regulatory filing. Net profit data not available. The tech giant did not provide results for each business segment and will release its final earnings report later this month.
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Samsung’s device solutions division, which oversees its cash cow chip business, is forecast to have lost about 3-4 trillion won, according to analysts’ estimates. If estimates hold, this would mark the division’s second straight quarterly loss.
In the January-March period, Samsung reported its first financial loss in 14 years as chip inventories rose significantly amid a slowdown in global demand. Earlier, Samsung’s chip business recorded a loss in the first quarter of 2009.
The chipmaker forecast the global chip market to shrink 6 percent to $563 billion this year, due to a sharp drop in demand, and warned of tough conditions continuing throughout the year.
But there are some positive forecasts that the chip cycle has bottomed out, with demand likely to increase for memory chips used in artificial intelligence (AI)-powered products and services, including generative AI chatbot ChatGPT.
Shares of Samsung Electronics have risen 29 percent this year on those rosy prospects. That global memory chip makers have cut production over the past few months has added to that optimistic outlook.
Samsung joined its peers earlier this year in cutting production to address a persistent supply glut. “Memory chip inventory levels are expected to peak in the third quarter,” said Han Dong-hee, an analyst at SK Securities.
“Samsung’s performance will improve faster than the pace of the broader industry’s recovery, as the impact of inventory write-downs diminishes.” Industry tracker TrendForce warned, however, that inventory levels “remain persistently high” despite chipmakers’ efforts to reduce supply, keeping DRAM prices low.
“While the shortfall in production may help moderate the quarterly price decline, a real recovery in prices may not be seen until 2024,” it said.
