Samsung Electronics expects a 96% profit plunge in the second quarter (Q2) of 2023 amidst a weak demand for memory chips. It’s the second quarter in a row that the South Korean firm is expecting a significant regress in its financial gains.
Having seen worse financial returns in the first quarter of 2023 already, Samsung is headed to another similar fortunes which is its worst in over a decade. Find out in detail Samsung Suffers Its Worst Profit Drop in a Decade in Q1 2023
Samsung Electronics has kept a low bar for its profit in its financial report for the second quarter of 2023. The South Korean tech giant believes it will witness a 96% slump in profit owing to weak memory chip sales.
The firm estimates its operating profit to be $459 million. It is 600 billion in Korean won which is down from 14.1 trillion Korean won in the same period (April to June) from 2022.
It’s the company’s lowest quarterly profit in over a decade. Last time, Samsung generated 590 billion won back in the first quarter of 2009.
And the company has not expected large financial returns either. As per Reuters, the forecast for the Q2 2023 Samsung aligns with its expectations. The leading phone maker estimated around 555 billion Korean won in profit for the period. Likewise, total revenue for the second quarter is expected to be 63.75 trillion Korean won. It’s a staggering fall to 17.4% from 77.2 trillion Korean won 12 months back.
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Samsung to see a rebound at the end of 2023
The reason for the downturn owes to how companies acted with chips during the pandemic. As Covid-19 struck, several manufacturers kept a large number of chips in store. However, with times easing, inventories have remained huge as electronic business is down due to inflation. Prices for memory chips have also come down.
“Demand remained weak. But now the key is the supply [of memory chips]. Samsung Electronics announced the meaningful production cut in early April so we anticipate [that] in the third quarter,” SK Kim, executive director of Daiwa Securities Capital Markets, said to CNBC’s “Squawk Box Asia”. You may like to read: Samsung Unveils Fastest LPDDR5X DRAM with 8.5 Gbps Speed
Samsung has already said that it will cut down memory chip production to combat minimal business growth.
“With that, we assume that the prices can rebound at the end of this year or early next year,” said Kim. He says that the South Korean chip maker will benefit from the US sales ban on Micron products in China. Samsung is the world’s largest DRAM chipmaker followed by SK Hynix and Micron.
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“But at the same time, there’s also the weak demand from China because of the uncertainty in production,” said Kim.
Samsung will publish its full financial report for Q2 2023 on July 27.
