Samsung Electronics anticipates that their profit in the second quarter will experience a sharp decline of 96% to 600 billion Korean won due to the ongoing weak demand for memory chips. This will be the lowest profit the company has recorded since the first quarter of 2009. SK Kim of Daiwa Securities Capital Markets commented to CNBC's "Squawk Box Asia" on Friday that, based on their expectations, there should be meaningful adjustments in inventory and supply resulting in a rebound of prices by the end of this year or early in the next.
Samsung Electronics predicted a 96% drop in profits for the second quarter of 2023 due to the continued lack of demand for memory chips. This would be the lowest quarterly profit for the dynamic random-access chip maker since the first quarter of 2009, estimated at 600 billion Korean won ($459 million), compared to the year-earlier result of 14.1 trillion Korean won. Analysts' forecasts for profit in the quarter range around 555 billion won, according to Reuters and Refinitiv SmartEstimate. The tech giant also predicted that revenue would decrease 17.4%, from last year's 77.2 trillion Korean won to 63.75 trillion won. The official earnings report is scheduled to be released on July 27.
The pandemic-led boom caused smartphone and PC makers to stockpile memory chips due to increased demand for consumer electronics. However, the industry is now facing an abundance of these chips as consumers purchase fewer devices due to mounting inflation. Prices for these chips therefore have dropped. SK Kim, executive director of Daiwa Securities Capital Markets, told CNBC's "Squawk Box Asia" on Friday that demand for the chips has been weak, but the key is the supply. Samsung Electronics announced a significant reduction in production in early April, with smaller manufacturers such as SK Hynix and Micron following suit. Kim suggested that the prices may climb back up by the end of this year or early next.
Kim suggested that due to the U.S. barring sales of Micron products in China, both Samsung and SK Hynix may benefit from the additional demand. However, Kim pointed out that the uncertain production output in China weakens the demand. Fortunately, the U.S. has granted both Samsung and SK Hynix a one-year exemption for importing advanced tools for their China plants which, according to the Wall Street Journal, is expected to renew 'for the foreseeable future.' On the first quarter, Samsung's operating profit reportedly went down to 640 billion Korean won million from the 14.12 trillion won it earned on the year prior. Samsung shares fell 2% in Friday morning trade.
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