Samsung Electronics, the world’s largest maker of memory chips and smartphones, has faced significant challenges in its semiconductor business this year. The company reported losses of 4.58 trillion won and 4.36 trillion won for the first and second quarters, respectively. In the third quarter, Samsung’s profit plunged 78%, better than analysts’ expectations of an 80% drop.
The decline in Samsung’s semiconductor division can be attributed to various factors, including a decrease in the price of memory chips due to oversupply and reduced demand for devices like smartphones and laptops. This turmoil has had a significant impact on Samsung’s profits.
Looking ahead, there may be some glimmers of hope for Samsung. The company’s supply of advanced memory chips for Nvidia’s AI-focused GPUs could boost its performance in the coming quarters. Additionally, the launch of Apple’s iPhone 15 series, for which Samsung supplies the display, could increase sales in its display division.
Analysts predict that memory chip prices may decline in the third quarter but start to rebound in the fourth quarter. Samsung’s earnings guidance for the third quarter indicates a more modest decline in profit compared to previous quarters, with an estimated operating profit of 2.4 trillion won and sales down 13%.
However, there are concerns that Samsung’s earnings may still fall short of consensus estimates due to higher costs from reduced memory production and continued soft demand for its semiconductor manufacturing unit. Despite these challenges, experts believe that excess inventory will decrease and memory prices will rise in the fourth quarter.
In addition to its semiconductor struggles, Samsung has also faced difficulties in the smartphone market, which has been in decline for the past two years. The company experienced a more significant decline in smartphone shipments compared to its competitors, with a 16% drop in the first half of 2023.
Overall, the outlook for Samsung’s semiconductor and smartphone businesses remains uncertain. While there are potential opportunities for growth, the company will need to navigate through challenges such as declining prices and demand in the market.