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Samsung profit plummets as chip glut persists

CNA – Samsung Electronics’ June quarter profit is expected to plunge 96 per cent on-year to the lowest for any quarter in more than 14 years, as a chip glut continues to drive large losses in the tech giant’s cash cow business despite a supply cut.

Operating profit for the world’s biggest maker of memory chips, smartphones and televisions likely fell to KRW555 billion (USD427 million) in the April to June quarter, according to a Refinitiv SmartEstimate from 27 analysts, weighted toward those who are more consistently accurate.

If so, it would be Samsung’s lowest profit since the fourth quarter of 2008, when Samsung Electronics reported a consolidated operating loss of about KRW740 billion. It compares with an operating profit of KRW14.1 trillion in the April to June quarter last year.

This is because its chip division, traditionally its biggest earner, likely reported quarterly losses of around KRW3 trillion to four trillion as memory chip prices fell further and its inventory values were slashed.

Prices of DRAM memory chips – widely used in smartphones, PCs and servers – continued to slide in the quarter, falling about 13 per cent to 18 per cent according to TrendForce, as chip buyers refrained from purchasing new chips and used up inventories.

However, the price decline slowed from previous quarters as Samsung Electronics and memory chip peers cut supply, and is expected to hit bottom around the third quarter, although a substantial recovery might not come until 2024, analysts said.

Despite the current downturn, Samsung is working to increase its share of chip demand from the exploding field of artificial intelligence (AI), such as with high bandwidth memory (HBM) and chip contract manufacturing, they said.

People seen at a Samsung convention. PHOTO: AFP