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Samsung Electronics Generate Massive Profits in the Second Quarter

Paul Stewart by Paul Stewart
July 11, 2022
in Business
Samsung's chip profits shed a positive light amid trying times

Samsung's chip profits shed a positive light amid trying times

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While business has been slow for many, Samsung Electronics improved profits from April to June, an achievement last seen in 2018.

Despite inflation, the company achieved strong sales of memory chips for server customers. As a result, shares of the memory chip and smartphone maker rose 2.5% after the announcement of preliminary second-quarter results, while the broader market rose 1.5%.

Samsung reported an operating profit of 14 trillion won, or $10.7 billion, up 11% from a year earlier. Revenue also increased by 21%, in line with estimates. The company had a strong quarter at a difficult time for chip makers who warned of an impending surplus of chips from customers stockpiling during the pandemic to meet growing demand from people working from home.

Read also: 50 Million Unsold Samsung Phones Remain with Distributors

Chip makers like Micron and Advanced Micro Devices report falling demand as inflation weighs on spending.

“Memory chipmakers are expected to build inventory and hike shipments when prices rebound, and demand recovers next year,” said Cape Investment analyst Park Sung-Soon.

Data provider TrendForce reports that specific DRAM chip prices fell by around 12% last month, while NAND Flash chip prices are expected to drop 5% between July and September compared to last quarter.

Sales of server chips mark the pinnacle for Samsung’s business as inflation, the possibility of a downturn in major markets, the Russian invasion and the Chinese blockade of COVID-19 have held back sales of Samsung phones. In addition, tech companies like Amazon, Google, Alphabet’s Meta and Microsoft have played a pivotal role in Samsung’s profits by purchasing chips to meet the demand for the cloud.

On the other side of the table, Foxconn, a Taiwanese contract electronics supplier and Apple iPhone maker, recently raised its full-year outlook and expressed optimism for the third quarter.

The US dollar value also hit a 20-year high, boosting Samsung’s chip profits in the second quarter. This is because the chips are sold in dollars, which, once converted, contribute to the Korean headquarters figures.

Smartphone shipments in the second quarter were estimated at between 62 and 64 million, 5 to 8% lower than the March estimate. In the first quarter, Samsung shipped 74 million smartphones. The lower demand for smartphones is due to inflation.

“This trend is the same for major global smartphone makers, although there is variance to some degree,” said Jene Park, Senior analyst at Counterpoint. “In particular, the hit to the demand for low- and mid-end smartphones seems more severe.”

Read also: Sony Makes Its First Venture Into the PC Space with Its Inzone Monitors and Headsets

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Opinions expressed by CEO Weekly contributors are their own.
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Paul Stewart

Paul Stewart

Paul manages his own online magazine and works as the content manager. He also contributes his writings about news, politics, and leadership.

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While business has been slow for many, Samsung Electronics improved profits from April to June, an achievement last seen in 2018.

Despite inflation, the company achieved strong sales of memory chips for server customers. As a result, shares of the memory chip and smartphone maker rose 2.5% after the announcement of preliminary second-quarter results, while the broader market rose 1.5%.

Samsung reported an operating profit of 14 trillion won, or $10.7 billion, up 11% from a year earlier. Revenue also increased by 21%, in line with estimates. The company had a strong quarter at a difficult time for chip makers who warned of an impending surplus of chips from customers stockpiling during the pandemic to meet growing demand from people working from home.

Read also: 50 Million Unsold Samsung Phones Remain with Distributors

Chip makers like Micron and Advanced Micro Devices report falling demand as inflation weighs on spending.

“Memory chipmakers are expected to build inventory and hike shipments when prices rebound, and demand recovers next year,” said Cape Investment analyst Park Sung-Soon.

Data provider TrendForce reports that specific DRAM chip prices fell by around 12% last month, while NAND Flash chip prices are expected to drop 5% between July and September compared to last quarter.

Sales of server chips mark the pinnacle for Samsung's business as inflation, the possibility of a downturn in major markets, the Russian invasion and the Chinese blockade of COVID-19 have held back sales of Samsung phones. In addition, tech companies like Amazon, Google, Alphabet's Meta and Microsoft have played a pivotal role in Samsung's profits by purchasing chips to meet the demand for the cloud.

On the other side of the table, Foxconn, a Taiwanese contract electronics supplier and Apple iPhone maker, recently raised its full-year outlook and expressed optimism for the third quarter.

The US dollar value also hit a 20-year high, boosting Samsung's chip profits in the second quarter. This is because the chips are sold in dollars, which, once converted, contribute to the Korean headquarters figures.

Smartphone shipments in the second quarter were estimated at between 62 and 64 million, 5 to 8% lower than the March estimate. In the first quarter, Samsung shipped 74 million smartphones. The lower demand for smartphones is due to inflation.

“This trend is the same for major global smartphone makers, although there is variance to some degree,” said Jene Park, Senior analyst at Counterpoint. “In particular, the hit to the demand for low- and mid-end smartphones seems more severe.”

Read also: Sony Makes Its First Venture Into the PC Space with Its Inzone Monitors and Headsets

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