Samsung Electronics Q2 profit falls 95 percent as chip glut continues

Samsung Electronics reported a 95 percent on-year plunge in operating profit to 668.5 billion won ($525 million) in the April-June period, still reeling from continued chip glut and weak demand.

Samsung Electronics' Seocho office [YONHAP]

Samsung Electronics reported a 95 percent on-year plunge in operating profit to 668.5 billion won ($525 million) in the April-June period, still reeling from continued chip glut and weak demand.

The figure exceeded the preliminary 600 billion won published by the company on July 7 and also beat the market consensus of 225 billion won compiled by FnGuide.

The second-quarter sales dropped 22.3 percent to 60 trillion won, short of the analyst expectation of 61.8 trillion won.

Quarterly net profit nosedived 84.5 percent to 1.7 trillion won, above the market estimate of 1.1 trillion won.

Samsung's Device Solutions division, which oversees its cash cow chip business, made losses of 4.36 trillion won, marking the division's second consecutive quarter of losses.

In the first quarter, Samsung's chip division reported its first financial loss in 14 years, as chip inventories grew significantly amid tapering global demand. Before that, the division recorded losses in the first quarter of 2009.

The chipmaker has forecast the global chip market will shrink six percent on-year to $563 billion this year due to a sharp drop in demand and warned of difficult conditions continuing throughout the year.

There are, however, some positive forecasts that the chip cycle has bottomed out, with the prospect of a surge in demand for memory chips used in AI-powered products and services, including the generative AI chatbot ChatGPT.

Samsung Electronics shares have surged more than 25 percent this year to date on that rosy prospect.

Global memory chip makers cutting production for the past few months adds to that optimistic view. Samsung joined its peers earlier this year to cut production to resolve a persistent supply glut.

Echoing the sentiment, SK hynix, a smaller rival, said Wednesday the memory chip market is believed to "have entered a recovery phase after bottoming out in the first quarter."

Late last month, Micron CEO Sanjay Mehrotra also said the memory market "has passed its trough in revenue, and we expect margins to improve as industry supply-demand balance is gradually restored."

BY LEE JAE-LIM, YONHAP [lee.jaelim@joongang.co.kr]