Chip business dragged down, Samsung's Q2 profit may plummet by 99%

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Author：netwing Time：2023-07-03 Browse：

According to South Korean media reports, due to the ongoing chip downturn, analysts predict that Samsung Electronics and SK Hynix's chip departments will continue to face pressure on their second quarter performance after reporting losses in the first three months.
According to a survey by Infomax, a financial news agency under Yonhap, South Korean securities analysts expect an overall operating profit of KRW 100.4 billion (approximately USD 76.5 million) for Samsung in the second quarter of 2023 (April June), a sharp drop of 99.3% from KRW 14.09 trillion in the same period last year.
Among them, Samsung's device solutions division, which is responsible for the chip business, will still face operational pressure in the second quarter, with operating profit losses of KRW 3 trillion to KRW 4 trillion, but slightly improved compared to the operating profit loss of KRW 4.58 trillion in the first quarter.
Due to the global economic slowdown, customers such as data centers and personal computer (PC) manufacturers have reduced their purchases, resulting in the chip industry still struggling with inventory surplus.
The price of storage chips has also plummeted as a result, and market research firm TrendForce data also mentioned that DRAM prices fell by as much as 20% in the first quarter of 2023. NAND Flash, mainly used for storage devices, also experienced a significant decline, with prices dropping by about 10% to 15% in the first quarter.
As the world's largest manufacturer of storage chips and smartphones, Samsung's operating profit in the first quarter of this year plummeted by 95% year-on-year, setting the worst record in 14 years. In April this year, Samsung changed its previous tough stance and announced a significant reduction in production of storage chips, citing sluggish global demand and customers slowing down their purchases due to sufficient inventory.
In the first quarter of 2023, SK Hynix's operating loss expanded from KRW 1.89 trillion in the fourth quarter of 2022 to KRW 3.4 trillion (approximately USD 2.54 billion), marking the most severe loss since SK Group acquired Hynix in 2012. On average, analysts expect SK Hynix to experience an operating loss of 2.86 trillion Korean won in the second quarter, marking the third consecutive quarter of losses.
However, analysts say that as the production reduction effect gradually becomes apparent and demand rebounds, the global chip market is expected to rebound in the second half of the year.

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