Samsung Profits down 95% as Chip demand falls

As a result of reduced demands for semiconductor-dependent products, Samsung Electronics announced a 95% drop in quarterly earnings on Thursday. This was owing to the chip industry’s slowdown, which lasted despite output reduction. This highlights the unheard semiconductor slump that caused the South Korean company to suffer a record operational loss from its main chip sector of 8.9 trillion won in the first half of this year. The second half of the year is predicted to see a slow recovery in global demand, which could boost component business profitability. 

Despite a massive 95% drop in operational profit due to falling pricing in Samsung’s core semiconductor industry, the amount nonetheless topped estimates of 640 billion Korean won. The FactSet report states that the firm reported revenues of 60.01 trillion Korean won for the three months which ended on June 30, a 22% decrease year over year and about in line with consensus projections of 60.6 trillion Korean won. 

Analysts claim that Samsung is lagging behind SK Hynix, the market leader in high-end DRAM chips like high bandwidth memory (HBM) and premium DDR5 products required to feed data into AI processors. After covid lockdown, Samsung has struggled with memory chip demand because the stocks have been stored to meet up the increased consumer sales, which now turned up as surplus chip stocks. This came out as the production decrease announcement from Samsung in April. 

The second half of the year is likely to see more production cuts across the board, but demand is anticipated to increase gradually, as Samsung stated. The firm revealed in its earnings report that the Mobile Experience (MX) and Network businesses reported combined sales of KRW 25.55 trillion and operating profit of KRW 3.04 trillion for the second quarter. 

According to CEO Kyung Kye-hyun, the firm plans to bring up more manufacturing units in Pyeongtaek, South Korea, and begin the export of advanced 4-nanometer chips from the Texas plant in 2024. Also stated that the firm’s capital expenditures for the second quarter were 14.5 trillion won, out of which 13.5 trillion won was spent on semiconductors.

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