Ongoing glut in chips sees Samsung warn that its second quarter profits are likely to plunge a staggering 96 percent
Samsung Electronics has shed light on the painful economic reality facing tech manufacturers, after it warned of a stark decline in profits.
Samsung last Friday issued its earnings guidance for the second quarter, and it made for grim reading for investors and shareholders.
The South Korean electronics giant forecast a staggering 96 percent plunge in second-quarter operating profit, amidst an ongoing slump in demand for consumer electronics, including smartphones.
It predicted a consolidated operating profit for Q2 of approximately 600 billion Korean won ($459 million) for the April to June period, down from 14.1 trillion won a year earlier.
This would make it Samsung’s lowest profit for any quarter since a 590 billion won profit in the first quarter of 2009, but is roughly in line with analyst expectations.
The world’s largest memory chip and smartphone maker also forecast consolidated sales to be down approximately 22 percent at 60 trillion Korean won.
Samsung is due to release detailed earnings on 27 July.
The huge Q2 profit decline comes after Samsung in its Q1 period had reported a huge 4.58 trillion won loss in its chip business – its lowest profit in 14 years. This was due to memory chip price declines and reduction of inventory values.
But what has caused the profit decline for the second quarter?
Well it seems that the glut of chips is still impacting Samsung’s bottom line, but the good news according to analysts is that the losses in its memory chip business likely shrank due to increased sales of DRAM chips.
The memory chip downturn began last year and is expected to hit bottom in the third quarter.
It should be remembered that in April 2023, Samsung responded to the uncertain economic conditions worldwide, and said it would make a “meaningful” cut to chip production.
That decision followed similar moves by smaller rivals such as SK Hynix and Micron.
Samsung’s decision to cut chip production came amid a sharp global downturn in semiconductor demand, that had sent prices plummeting.