Samsung Electronics, the world’s leading manufacturer of memory chips, smartphones, and televisions, announced its quarterly earnings for the second quarter. Despite an 84% drop in net profit, the company remains optimistic about the future of the memory-chip industry.
Second Half Recovery Expected
Samsung anticipates a gradual recovery in global demand for technology products and semiconductors during the second half of the year. This positive outlook instills hope in the market as the industry navigates through a challenging period.
Decline in Net Profit and Operating Loss
Net profit for the April-June quarter was reported at 1.724 trillion Korean won ($1.35 billion), a significant decline from the previous year’s net profit of KRW11.099 trillion. Furthermore, the chip-making segment experienced its second consecutive quarter of operating loss, with a substantial loss of KRW4.360 trillion in the June quarter.
Factors Affecting Performance
The decline in profit reflects weak consumer demand for technology products, a key driver for memory chip demand. Additionally, a supply glut of semiconductors has resulted in declining prices.
Revenue and Operating Profit
Samsung’s revenue for the second quarter decreased by 22% compared to the same period last year, amounting to KRW60.006 trillion. The operating profit also plummeted by 95%, reaching KRW668.50 billion, marking the company’s weakest quarterly performance in over 14 years. These figures closely align with the preliminary forecasts provided by Samsung.
Despite the challenging market conditions, Samsung Electronics continues to demonstrate resilience by surpassing expectations in its quarterly earnings report. With hopes of a recovery in the coming months, the company remains steadfast in its commitment to innovation and technological advancements.
Samsung Faces Challenges Amidst Delayed Recovery in Chip Demand
Despite an increase in demand for high-performance chips driven by the artificial intelligence (AI) segment, Samsung is still facing challenges due to delayed recovery in chip demand from smartphone manufacturers and clients’ inventory adjustments on weak global demand for IT products.
In the second quarter, Samsung’s facility investment rose by 18% from the previous quarter to KRW14.5 trillion. The company is optimistic about a gradual recovery in demand for IT products and memory chips.
Analysts from Nomura, C.W. Chung and Eon Hwang, believe that Samsung’s profit is expected to improve in the third quarter. The semiconductor cycle seems to have reached its lowest point due to industry-wide production cuts. Additionally, the booming AI segment is currently driving demand for more advanced memory chips, which Samsung specializes in.
Citigroup analyst Peter Lee suggests that Samsung’s resilient smartphone business, coupled with an anticipated chip-industry recovery, could result in better-than-expected earnings for the full year.
Furthermore, Samsung has recently unveiled two new foldable smartphones: the large-screen Galaxy Z Fold 5 and the more compact Galaxy Z Flip 5. With over 80% market share in the foldables category, Samsung continues to dominate the market.