Samsung chip turnaround likely in second half after dismal Q2

Samsung Electronics Co. expects to see light at the end of the tunnel with a likely turnaround of its mainstay chip business in the second half after posting its worst overall operating profit in 14 years in the second quarter.

The South Korean tech giant also hopes new foldable smartphones due in the coming months boost its mobile business, stagnant after unveiling its flagship Galaxy S23 series earlier this year.

Earlier on Friday, Samsung, the world’s largest memory chip and smartphone maker by volume, said it likely posted 600 billion won ($458 million) in consolidated operating profit in the April-June period, down 96% from 14.1 trillion won in profit a year earlier.

Second-quarter sales likely fell 22% to 60 trillion won from 77.2 trillion won, the South Korean tech giant said in a short preliminary earnings statement.

The company is due to release detailed results, including a divisional breakdown and net profit, later this month.

The operating profit estimate, which came above the market expectations of around 282 billion won, would mark the company’s worst quarterly profit since the global financial crisis in 2009 if confirmed later this month.

In the first quarter of 2009, the company posted an operating profit of 590 billion won.

LIKELY TO REPORT CHIP PROFIT IN Q4

Although Samsung didn’t provide divisional performance, analysts said the company’s Device Solutions division, which oversees its chip business, likely posted a quarterly loss to the tune of 4 trillion won, compared to a loss of 4.6 trillion won in the first quarter, as memory chip prices continued to fall and its inventory value was slashed.

Prices of DRAM chips – widely used in smartphones, PCs and servers – fell 13-18% in the second quarter from the previous quarter as buyers refrained from new chip purchases, according to market tracker TrendForce.

In the third quarter, DRAM prices are forecast to continue their decline, albeit at a much milder pace of 0-5%.

While Samsung’s dismal second-quarter chip losses underscore the severity of the semiconductor industry downturn, most leading chipmakers have expressed optimism that the market would stage a rebound in the latter half of this year.

KB Securities said it expects Samsung’s chip business to post a profit of 1.2 trillion won in the fourth quarter.

Major chipmakers such as SK Hynix Inc., Micron Technology and Kioxia have been cutting wafer input since the fourth quarter of last year to counter growing inventories and falling chip prices.

Samsung also joined its peers’ moves earlier this year, saying that it will instead focus on producing more advanced semiconductors such as DDR5, LPDDR5X and HBMS chips, to stay ahead of its rivals.

FOLDABLES TO LEAD MOBILE BUSINESS IN H2

Samsung’s mobile business likely posted an operating profit of around 3.3 trillion won on reduced marketing costs, but lower than 3.94 trillion won in the first quarter when it launched its flagship Galaxy S23 series.

The company expects its premium products, including new foldable phones, to strengthen its overall mobile phone market leadership and put it on an equal footing with Apple’s high-end line of iPhones.

Samsung is set to hold the Galaxy Unpacked 2023 in Seoul in the final week of July to release the fifth-generation Samsung Galaxy Z series of foldable smartphones.

With its chip loss likely bottoming out, Samsung is expected to post an improved company-wide operating profit of 3.7 trillion won in the third quarter and 5 trillion won in the fourth quarter, analysts said.

(Updated with Samsung’s business outlook for the rest of the year and analysts’ estimates for the company’s other business divisions)

Write to Jeong-Soo Hwang and Ik-hwan Kim at hjs@hankyung.com


In-Soo Nam edited this article.