Samsung Electronics, the world’s largest smartphone maker, revealed on Friday that it anticipates its second-quarter profit to be the lowest it has been since early 2009. This unfortunate downturn stems from weak consumer demand for technology products, resulting in an oversupply of memory chips in the market.
The company’s forecast highlights its ongoing struggle with sluggish chip demand, which caused its semiconductor segment to incur substantial losses in the first quarter of this year. Initially, prices for dynamic random-access memory and flash memory chips soared as consumers stockpiled devices during the Covid-19 pandemic. However, as demand dropped, manufacturers, including Samsung, were forced to reduce output.
Samsung now projects an operating profit of 600 billion won, approximately $458 million, for the June quarter. This marks a significant decline compared to the 14.1 trillion won recorded in the same period last year. Additionally, revenue for the April-June period is expected to decrease by 22% to 60 trillion won.
Samsung Faces Challenges in Smartphone Business
The Korean company is likely to be facing challenges in its smartphone business, which competes with Apple. Although Samsung overtook Apple as the largest global smartphone maker by market share in the first quarter of this year, the overall smartphone market fell by 14% from the same period last year. This weakness is expected to have carried over into the second quarter.
Semiconductors: The Main Challenge for Samsung
According to Richard Windsor of research company Radio Free Mobile, the weakness in consumer goods and electronics end markets may also have affected Samsung, but the main challenge for the company is almost certainly in semiconductors.
Hope on the Horizon for Samsung
Despite the current challenges, there could be better news coming for Samsung. The company has previously suggested that chip demand will recover in the second half of this year. Executives at U.S. rival Micron Technology have also expressed optimism, stating that they believe the memory-chip industry has passed its trough and is set for recovery.
Samsung Expected to Report Stabilizing Q2 2023 Results
According to industry experts, Samsung is anticipated to announce stabilizing Q2 2023 results in its upcoming report. While the official statement is yet to be released, it is expected to align with Micron’s recent remarks, indicating that the situation has not improved significantly, but at least it has reached a point of cessation.
The stock market responded to this news with a 2.4% decline in Samsung stock on Friday.