Samsung Electronics reported a significant decline in operating profits for the second quarter, plummeting by over 95 percent due to weak demand for memory chips. The company, which is the flagship subsidiary of the Samsung Group, the largest family-controlled conglomerate in South Korea, recorded an operating profit of 668.5 billion won ($525.3 million) for the April to June period, a sharp decrease from 14.1 trillion won in the previous year. This marks the company’s worst quarterly profit since the first quarter of 2009.
Net profit for the second quarter also fell by 84.5 percent to 1.72 trillion won, and sales dropped 22.3 percent to 60 trillion won. Samsung attributed the decline to sluggish demand for its memory chips and mobile phones. However, the company remains optimistic about the second half of the year, expecting a gradual recovery in global demand to improve earnings, especially in the component business. Still, it acknowledges that ongoing macroeconomic risks may pose challenges.
In recent years, South Korean chipmakers, including Samsung, enjoyed record profits as chip prices surged. The pandemic led to increased demand for computers and smartphones during lockdowns, prompting chipmakers to boost production. However, demand waned as lockdowns eased, and the global economic slowdown affected memory chip sales. Consumer demand weakened, leading to budget cuts and order cancellations for chipmakers.
Looking ahead, Samsung plans to decrease output further, estimating a 9.3 percent decrease this year due to the weak overall economy. The company anticipates a slowdown in price declines for DRAM chips, commonly used in PCs and smartphones, in the second half of the year as chipmakers tighten supply. To counter the challenging market conditions, Samsung has made “meaningful” cuts in memory chip production.
Despite the recent drop in profits, Samsung remains committed to bold investments in its future endeavors.
