Revenue and profit for Samsung Electronics, South Korea’s leading technology company, have taken a hit in the second quarter as the global chip shortage continues to plague the industry. The company reported a significant decline in its operating profit, which is estimated to be around 600 billion won ($1=1,308.39 won) for the quarter, compared to 14.1 trillion won in the same period last year.
Even though the operating profit figure surpassed Reuters’ estimate of 555 billion won, it still reflects the challenges faced by the memory chips market, which has experienced weakening demand despite recent production cuts. Sales also dropped from 77.2 trillion won to approximately 60 trillion won.
The second-quarter profits remained at a similar level to the previous quarter, with the company logging 640 billion won. However, the memory chips unit of Samsung is expected to report quarterly losses of between 3 trillion and 4 trillion won, as the prices of DRAM memory chips used in smartphones and computers have fallen due to decreased demand for electronics.
While the chip shortage is expected to reverse in the coming months as inventories run dry and production is scaled down, a considerable recovery in demand seems unlikely given the deteriorating global economic conditions. To counter this challenge, Samsung is capitalizing on the increasing demand for artificial intelligence-driven chips, particularly high bandwidth memory chips used in running AI models.
Despite the overall decline, Samsung’s smartphone business showcased resilience and is expected to have registered a profit for the quarter. The company is also set to launch its latest range of foldable phones in July, beating rival Apple Inc (NASDAQ:AAPL) to the market.
However, Samsung’s shares fell by over 1% in early trade on Friday, reflecting investor concerns about the impact of the chip shortage on the company’s overall performance.
In conclusion, Samsung’s second-quarter earnings reveal the ongoing struggles faced by the memory chips market due to weakening demand. The company’s operating profit and sales have declined, while its smartphone business remains a bright spot. As Samsung prepares to release its new foldable phones and focus on AI-driven chips, it strives to overcome the challenges posed by the chip shortage and navigate the uncertain global economic conditions.
