Samsung’s Profit Drops 96 Percent Because Of Oversupply

(CTN News) – Samsung Electronics says its second-quarter operating profit will plunge 96 percent, largely in line with forecasts, as a chip glut contributes to large losses in the company’s key business despite a reduction in supply.

According to the company’s preliminary earnings statement, it reported a drop in operating profit from April to June to 600 billion won ($458m), down from 14.1 trillion won ($10.8bn) a year earlier.

Based on company data, it would be Samsung’s lowest profit since the first quarter of 2009, when it earned 590 billion won ($451m).

A Refinitiv Smart Estimate of 555 billion won ($427m) forecast by analysts who are more consistently accurate was largely in line with the profit.

The shares of Samsung fell by 1.4 percent in early morning trading, underperforming a decline of 0.6 percent in the broader market.

On July 27, Samsung is scheduled to release its detailed earnings report.

As memory chip prices fell further and inventory values decreased, the company reported a staggering loss in its chip business in the January-March quarter of 4.58 trillion won ($3.5 billion).

In spite of this, Samsung’s memory chip business suffered less in the second quarter due to stronger sales of DRAM chips, which are widely used in computers, mobile phones, and servers.

Despite a drop in memory prices, the drop was not as large as anticipated, according to Park Kang-ho, an analyst with Daishin Securities.

The full earnings report will provide investors with important signals on the third quarter – the impact of the production cut, the recovery of demand, and whether higher-end DRAM and high bandwidth memory [HBM] products will improve [Samsung’s] profit mix.

Analysts predict that the memory chip downturn that began last year will end in the third quarter, although the rebound may be small at first.

The price of DRAM memory is expected to increase by double digits every quarter from the second half of 2024, according to Greg Roh, head of research at Hyundai Motor Securities.

The company, unlike its competitors, is expected to maintain its investment in memory chips this year, resulting in increased market dominance in 2025.

Samsung is expected to unveil its latest foldable smartphones in Seoul later this month, weeks earlier than usual – seen by analysts as a bid to dominate the premium phone market for longer before Apple releases its next iPhone.

Analyst outlooks for Samsung’s mobile profits in the third quarter were mixed due to a weak consumer sentiment in the global smartphone market, despite some recent improvement in economic indicators.

From April to June, Samsung reported revenues of 60 trillion won ($45.8 billion) down 22 percent from a year earlier.

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