Samsung expects second-quarter profit to plunge

Samsung expects second-quarter profit to plunge

SEOUL

Samsung Electronics said on July 7 it expects second-quarter operating profits to fall more than 95 percent on-year to their lowest level in 14 years, as a global glut of semiconductors continues to hurt its core memory sector.

The South Korean tech giant said in a regulatory filing that April-June operating profits were expected to drop 95.7 percent to 600 billion won ($458 million).

It would be their lowest profit since the first quarter of 2009's 590 billion won, a Samsung spokesman told AFP.

Sales are expected to drop 22.3 percent to 60 trillion won, the company added.

South Korean chipmakers, led by Samsung, have experienced record profits in recent years as prices have skyrocketed, but the global economic slowdown has harmed memory sales.

Prices of DRAM chips, which are often used in PCs and smartphones, continued to decline in the quarter - falling around 13 to 18 percent, according to Taipei-based market researcher TrendForce.

"The demand for memory is bottoming out with slower-than-expected demand coupled with the inventory in the market, which is still being cleared out since January," Neil Shah, an analyst at Counterpoint research, told AFP.

"This is a full U-turn from last year when the memory division contributed to more than a third of the profit," he added.

The announcement comes as securing supplies of advanced chips has become a crucial issue internationally, with the United States and China locked in a fierce battle for control of the market.

China's trade ministry on July 3 said exports of two rare metals vital for making semiconductors would require a licence from Aug. 1 in the name of "security and national interests".

But "curbs by China on Samsung's rivals such as Micron... could drive some tailwinds for Samsung," Shah said.

"We estimate the demand and supply balance at the end of this year and next year should be back to pre-pandemic levels, though not the significant post-pandemic uptick the industry witnessed in 2021 and 2022," he added.

Samsung is expected to release its final earnings report at the end of this month.