Samsung could report its worst profit in 14 years this week. This is because the price of its biggest business, memory chips, continues to fall and demand remains weak.
The South Korean tech giant announced earlier this month that it would post an operating profit of KRW 600 billion ($449 million) in the first quarter. If Samsung reports this figure, it will be its lowest profit since the first quarter of 2009.
Samsung has issued preliminary earnings guidance, but has not provided detailed figures. We will report full earnings for the first quarter on Thursday.
Samsung is the world’s largest manufacturer of memory chips, used in everything from PCs to data center servers.
At the height of the pandemic, demand for consumer electronics was high as people stayed home. Electronics companies piled chips into these products. But now, inflation and macroeconomic concerns are discouraging buyers from buying these commodities, leading to an oversupply of memory chips.
For example, IDC data shows that PC shipments fell 29% year-over-year in the first quarter.
Memory chip prices have fallen in the past few months due to large inventories and lack of demand.
“The memory market is in the middle of the worst recession in decades. Consumer electronics and traditional server markets are experiencing the most severe slowdowns even as the EV (electric vehicle) market grows.” said CrispIdea in a research note published last week. .
Analysts at Mirae Asset Securities expect Samsung’s chip division to post a loss of KRW 4.4 trillion in the first quarter.
Samsung said this month it would cut memory chip production to “meaningful levels”, citing deteriorating macroeconomic conditions and declining consumer demand. , now trailing rival SK Hynix. micron By doing so.
Investors hope production cuts at Samsung, the world’s largest memory chip maker, will push prices higher, and companies are digging into existing inventories.
Analysts at NH Investment and Securities said Samsung’s earnings will “begin to rebound in earnest” in the third quarter of this year, adding that production cuts “will have a positive impact on memory supply and demand dynamics.” rice field.
Meanwhile, Mirae Asset Securities said it expects Samsung’s memory chip inventory levels to peak in the second quarter, after which demand for the company’s semiconductors will recover.
Still, analysts warn that Samsung’s future business could come under more pressure.
“Losses in memory chips are expected to continue for the next few quarters as inventories remain at record highs, putting further downward pressure on chip prices,” analysts at CrispIdea said. “Technology demand remains subdued in the face of rising inflation and interest rates following a pandemic-era surge.”