As a result of continued chip oversupply and weak demand, Samsung Electronics reported on Friday that its operating profit for the second quarter likely fell by 96% from a year earlier.
The largest memory chip and smartphone manufacturer in the world estimated its April-June profit at 600 billion won ($461.2 million), a significant decrease from the 14.1 trillion won it reported the previous year.
Since the South Korean tech giant reported 590 billion won in operating profit during the first quarter of 2009, it was the worst quarterly profit in 14 years, according to the Yonhap news agency.
According to the company’s regulatory filing, sales probably dropped 22.3% to 60 trillion won from 77.2 trillion won the year before.
There was no information on net profit.
The tech behemoth did not disclose the results of each business division, but will do so by the end of this month when it releases its final earnings report.
Analysts predict that Samsung’s Device Solutions division, which is in charge of the company’s cash cow chip business, will have lost about 3–4 trillion won.
If the estimate is accurate, it would be the division’s second quarter of losses in a row.
Samsung experienced its first financial loss between January and March as a result of significantly bloated chip inventories and slowing global demand.
Earlier than that, in the first quarter of 2009, Samsung’s chip business experienced losses.
Due to a sharp decline in demand, the chipmaker predicted the global chip market will contract 6% on-year to $563 billion this year and warned that challenging conditions would persist throughout the year.
However, some optimistic predictions suggest that the chip cycle has peaked, with the possibility of a spike in demand for memory chips used in artificial intelligence (AI)-powered goods and services, such as the generative AI chatbot ChatGPT.
On the strength of that promising prospect, shares of Samsung Electronics have increased 29% so far this year. That upbeat outlook was further enhanced by the fact that global memory chip manufacturers have recently reduced production.
In order to address a persistent supply glut, Samsung cut production earlier this year along with its peers.
“Memory chip inventory levels are expected to peak out in the third quarter,” said Han Dong-hee, an analyst at SK Securities.
Samsung’s performance will improve more quickly than the industry as a whole as the effects of inventory write-downs fade.
However, despite chipmakers’ efforts to cut supply, inventory levels “persistently remain high,” according to industry tracker Trendforce, which keeps DRAM prices low.
The report warned that a real price recovery might not happen until 2024, despite the fact that production reductions might help to stop quarterly price declines.
