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Samsung Profits Plunge 95% as Memory Chip Demand Slumps
Updated: Jan 8
Samsung Electronics, the flagship subsidiary of the South Korean Samsung Group conglomerate, has reported a 95% plunge in quarterly operating profits due to weak global demand for memory chips.
The tech giant earned just 668.5 billion won ($523.5 million) in operating profit between April and June, down from 14.1 trillion won ($11 billion) a year earlier. This was Samsung's worst quarterly profit since Q1 2009.
Weak Chip Demand Hits Samsung Hard
Samsung blamed the profit slump on weak demand for memory chips, a key product line. Prices for DRAM and other memory chips have fallen up to 18% this quarter as the economic slowdown has curbed demand from PC, smartphone and other electronics makers.
Major chipmakers like Samsung and SK Hynix ramped up production during the pandemic to meet high demand. But lockdowns lifting and high inflation have now softened that demand. Output is expected to fall 9.3% this year.
Caution on Outlook Despite New Phone Launch
The results come despite Samsung yesterday unveiling new premium foldable phones - the Galaxy Z Fold 5 and Flip 5. The company said it expects smartphone demand to improve in H2, especially at the high end.
But Samsung cautioned that "continued macroeconomic risks could prove to be a challenge." Its share price rose 2.29% yesterday despite the profit warning.
Long-Term Bets on Chips
The downturn has not stopped Samsung making big long-term investments. In March, it pledged $227 billion over 20 years to build the world's largest chip plant near Seoul.
Analysts say premium phones like foldables can help Samsung weather the slump. They offer higher profit margins and are more resilient to downturns than mid-range models.
Samsung Q2 operating profit plunges 95% to $523 million due to weak memory chip demand
Company blames chip price slump on economic slowdown reducing electronics orders
Despite short-term weakness, Samsung remains bullish on long-term chip demand with new $227B semiconductor plant
Source: Aljazeera