SEOUL, Jul 6 (Reuters) – Samsung Electronics (005930.KS) earnings in June are expected to fall 96% year on year to the lowest level for any quarter in more than 14 years as surplus chips continue to be big losses in the tech giant’s cash cow business despite a supply.
Operating profit for the world’s largest maker of memory chips, smartphones and TVs likely fell to 555 billion won ($427 million) in the April-June quarter, according to a Refinitiv SmartEstimate of 27 analysts, weighted by 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 740 billion won. It compares to an operating profit of 14.1 trillion won in the April-June quarter last year.
This is because the chip division, historically the biggest earner, likely reported quarterly losses of about 3 trillion to 4 trillion won as memory chip prices continued to fall and inventory values were reduced.
Prices of DRAM memory chips — commonly used in smartphones, PCs and servers — continued to fall in the quarter, falling about 13% to 18%, according to TrendForce, as chip buyers refrained from buying new chips and used up supplies.
However, the price decline slowed from previous quarters as Samsung Electronics and memory chip peers cut supply, and is expected to bottom out around the third quarter, though a substantial recovery may not come until 2024, analysts said.
Despite the current recession, 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.
The mobile division likely reported an operating profit of about 3.3 trillion won, according to an average forecast from five analysts, as efforts to cut marketing costs offset a slight drop in smartphone shipments from the first quarter, when Samsung launched its latest flagship model.
Samsung is expected to unveil its latest foldable smartphones in Seoul later this month, weeks earlier than usual, seen by analysts as an attempt to dominate the premium phone market longer before rival Apple (AAPL.O) releases its next iPhone.
The tech giant will announce its preliminary second-quarter results on Friday before reporting full results later this month.
($1 = 1,298,7800 won)
Reporting by Joyce Lee; Edited by Sonali Paul