South Korean multinational manufacturing conglomerate Samsung has released its earnings estimate for the second quarter of this year, and the figures are not quite good. Here’s the news.
Sinking profits
Things are getting bleak for Samsung these days, as the company reported significant profit losses due to chip oversupply and slow demand.
Samsung, which is said to be the biggest memory chip and smartphone maker in the globe, projected its profits from April to June at 600 billion Korean won (KRW), or around $461 million. This is significantly lower than the KRW 14.1 trillion or about $11 billion it reported a year ago. This is also the second consecutive quarter Samsung reported worrying stats.
This marks the company’s worst quarterly profit in 14 years since the first quarter of 2009 when the South Korean tech giant reported KRW 590 billion, or around $454 million in operating profit.
As for the sales, they fell around 22 percent to KRW 60 trillion (around $46 billion) from last year’s KRW 77.2 trillion (around $59 billion), according to Samsung’s regulatory filing.
What’s the cause?
Financial analysts are saying that this poor performance is attributed to the losses from Samsung Device Solutions, the company’s semiconductor division. This division is expected to make losses of up to KRW 4 trillion, or around $3 billion. Customers are not patronizing enough memory chips for their high-performing computers and cloud servers. Samsung also previously admitted this trend would continue.
Furthermore, the South Korean chipmaker also predicted that the chip market globally is bound to shrink six percent on-year to $563 billion this year, all because of a significant and sharp drop in demand, and also warning that these challenges will continue over the rest of this year.
On a positive note
But on a positive note, analysts are optimistic. One analyst said, “Memory chip inventory levels are expected to peak out in the third quarter. Samsung’s performance will improve faster than the wider industry’s recovery pace, as the impact of inventory write-downs will lessen.”
News outlets also report a surge in demand for memory chips used in artificial intelligence (AI)-powered products and services, such as the popular AI chatbot, ChatGPT. On this aspect, Samsung shares have surged 29 percent this year.
In addition, Samsung’s smartphone division is appearing to have been performing solidly, nevertheless. For instance, the Samsung Galaxy S23 series, which launched in February of this year, has been selling so well across the globe. In fact, in certain countries, these high-end phones reportedly sold 1.6 to 1.7 times more than their predecessors during the same one-month time frame. Plus, Samsung’s home appliances and TV catalogs are also performing well.
Samsung will release its final earnings report later this month.
