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(LEAD) Samsung Electronics-Q2 earnings
(LEAD) Samsung Electronics Q2 profit drops 95 pct amid chip oversupply, weaker demand
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SEOUL, July 27 (Yonhap) -- Samsung Electronics Co. on Thursday reported a 95 percent fall in second-quarter operating profit, as macroeconomic woes have taken a toll on demand for chips used in electronic gadgets from mobile phones to computers to cars.
The world's largest memory chip and smartphone maker logged a profit of 668.5 billion won (US$525.8 million) for the April-June period, the lowest in 14 years. It went significantly down from the 14.1 trillion won it reported a year ago.
Sales fell 22.3 percent to 60 trillion won from the previous year's 77.2 trillion won, the company said in a regulatory filing. Its second-quarter net profit came to 1.72 trillion won, down 84.5 percent from a year earlier.
Samsung's Device Solutions division, which oversees its cash cow chip business, made losses of 4.36 trillion won, marking the division's second consecutive quarter of losses.
In the first quarter, Samsung's chip division reported its first financial loss in 14 years, as chip inventories grew significantly amid tapering global demand. Prior to that, the division recorded losses in the first quarter of 2009.
The chipmaker has forecast the global chip market will shrink 6 percent on-year to $563 billion this year, due to a sharp drop in demand, and warned of difficult conditions continuing throughout the year.
There are, however, some positive forecasts that the chip cycle has bottomed out, with the prospect of a surge in demand for memory chips used in artificial intelligence (AI)-powered products and services, including the generative AI chatbot ChatGPT. Samsung Electronics shares have surged more than 25 percent this year to date on that rosy prospect.
That global memory chip makers have slashed production for the past few months added to that optimistic view. Samsung joined its peers earlier this year to cut production to resolve a persistent supply glut.
Echoing the view, SK hynix, a smaller rival, said Wednesday the memory chip market is believed to "have entered a recovery phase after bottoming out in the first quarter."
Late last month, Micron CEO Sanjay Mehrotra also said the memory market "has passed its trough in revenue, and we expect margins to improve as industry supply-demand balance is gradually restored."
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