Samsung estimates profits plunged 96% in the second quarter

Samsung Electronics said it expects Profits plummeted 96% In the second quarter of 2023, due to continued weak demand for memory chips.

The world’s largest maker of dynamic random access chips forecast an operating profit of 600 billion won ($459 million) in the April-June quarter, down from 14.1 trillion won a year earlier.

It would be the company’s lowest quarterly profit since the 590 billion won recorded in the first quarter of 2009, based on the company’s past earnings figures.

The second-quarter profit forecast was largely in line with analysts’ expectations of 555 billion won, Reuters reported, citing Refinitiv SmartEstimate.

Samsung also forecast second-quarter revenue of 63.75 trillion won, down 17.4 percent from 77.2 trillion won a year earlier.

The company is scheduled to release its full earnings report on July 27.

Smartphone and PC makers stockpiled memory chips as demand for consumer devices increased during the pandemic-induced boom. But the companies are now grappling with excess chip inventories as inflation rises and consumers buy fewer electronics. As a result, the price of memory chips has dropped.

“Demand remains weak. But now the key is (memory chip) supply. Samsung Electronics announced a big cut in production in early April, so we expect that to happen in the third quarter,” SK Kim, executive director at Daiwa Securities Capital Markets, told Reuters on Friday. “Squawk Box Asia” on CNBC.

In April, Samsung said it would follow the lead of smaller rivals such as SK Hynix and Micron in “meaningful” cuts to memory chip production.

“According to this, we assume that the price may rebound towards the end of this year or the beginning of next year,” Kim said.

Kim further added that Samsung and South Korea’s second-largest chipmaker SK Hynix could benefit from additional demand from the U.S. ban on sales of Micron products in China.Micron Technology (Micron), headquartered in the United States, is The third largest DRAM chip maker Second only to Samsung and SK Hynix.

“But at the same time, demand in China is also weak due to uncertainties in production,” Kim said.

The U.S. gave Samsung and SK Hynix a one-year waiver to continue importing advanced tools for their Chinese factories.The waivers were supposed to expire in October, but the Wall Street Journal reported that a U.S. official said they “will be Update for the foreseeable future“.

Samsung’s first-quarter operating profit was 640 billion won, down from 14.12 trillion won a year earlier.

Samsung shares fell 2 percent in early trading on Friday.