Samsung Electronics, the world’s largest manufacturer of memory chips, smartphones, and TVs, is projected to experience a substantial decline in its June-quarter profit, Reuters reported. Analysts anticipate a staggering 96 per cent year-on-year drop, marking the lowest profit for any quarter in over 14 years. Despite efforts to curtail supply, a chip glut continues to plague Samsung’s cash cow business, resulting in significant losses.
According to a Refinitiv SmartEstimate from 27 analysts cited by Reuters, Samsung’s operating profit for the April-June quarter is predicted to reach 555 billion won ($427 million). If this estimate holds true, it would mark Samsung’s lowest profit since Q4 of 2008, when the company reported a consolidated operating loss of approximately 740 billion won. In contrast, last year’s same period saw Samsung achieve an operating profit of 14.1 trillion won.
The primary cause for this downturn is the chip division, traditionally Samsung’s most profitable sector. The division is expected to report quarterly losses ranging from 3 trillion to 4 trillion won due to the continuous decline in memory chip prices and reductions in inventory values. DRAM memory chip prices, widely utilized in smartphones, PCs, and servers, fell approximately 13 per cent to 18 per cent during the quarter, as reported by TrendForce. Buyers refrained from purchasing new chips, depleting existing inventories.
Nonetheless, the rate of price decline has slowed compared to previous quarters, mainly due to supply cuts implemented by Samsung Electronics and other memory chip manufacturers. Analysts predict the market will bottom out around the third quarter, although a significant recovery may not occur until 2024. Despite the ongoing downturn, Samsung aims to bolster its market share in the field of artificial intelligence (AI). The company focuses on high bandwidth memory (HBM) and chip contract manufacturing to achieve this.
Samsung’s mobile business is expected to report an operating profit of approximately 3.3 trillion won. This estimate is based on forecasts from five analysts who considered the company’s efforts to reduce marketing costs and a slight decline in smartphone shipments compared to the previous quarter, which saw the launch of Samsung’s latest flagship model.
To maintain dominance in the premium phone market, Samsung plans to unveil its latest foldable smartphones earlier than usual, with the launch scheduled for later this month in Seoul. Industry analysts view this move as an attempt to gain an edge over rival Apple before the release of the next iPhone.
Samsung Electronics will announce its preliminary second-quarter earnings results on Friday, followed by a comprehensive report later this month.
(With Inputs from Reuters)
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