The world’s largest memory chip and smartphone maker, Samsung Electronics, said on Friday its second-quarter profits likely fell by whopping 96%, thanks to the global chip glut eating into its key business.
The South Korean tech giant estimated its Q2 operating profit fell to 600 billion won ($459 million), from 14.1 trillion won a year earlier, in a short preliminary earnings statement.
That would be Samsung’s lowest profit for any quarter since a 590 billion won profit in the first quarter of 2009, company data showed.
Shares in Samsung fell 1.4% in early morning trade, underperforming a 0.6% drop in the wider market.
The company is due to release detailed Q2 earnings on July 27.
In the January-March quarter, Samsung reported a massive 4.58 trillion won loss in its chip business as memory chip prices fell further and its inventory values were slashed.
But in the second quarter, losses in Samsung’s memory chip business likely shrank due to more sales of DRAM chips, used in PCs, mobile phones and servers, analysts said.
“Although memory prices fell, the drop was not as large as feared,” said Park Kang-ho, analyst at Daishin Securities.
“When full earnings are announced, investors will be looking for third-quarter signals – how much effect the production cut will have in the third quarter, any demand recovery, and whether higher-end DRAM and high bandwidth memory (HBM) products are set to improve [Samsung’s] profit mix.”
Chip glut likely bottoming out
Analysts say the memory chip downturn that began last year is expected to hit bottom in the third quarter. The rebound may start small, however, they warned.
“DRAM memory prices are expected to rebound in earnest from the fourth quarter, and double-digit quarterly increases are expected from the second half of 2024,” said Greg Roh, head of research at Hyundai Motor Securities.
“Unlike its competitors, [Samsung] is expected to maintain its investment in memory chips this year … which will pay off in increased market dominance in 2025.”
In the mobile business, Samsung is expected to unveil its latest foldable smartphones later this month in Seoul, weeks earlier than usual.
Analysts see the move as a bid to dominate the premium phone market for longer before rival Apple releases its next iPhone.
The outlook for Samsung’s mobile profits in the third quarter remains mixed, however, as consumer sentiment in the global smartphone market remains weak, despite some recent recovery in economic indicators.
Samsung’s Q2 smartphone revenue likely fell 22% from the same period a year earlier to 60 trillion won, according to the company statement.
- Reuters, with additional editing by Vishakha Saxena