Samsung Electronics’ first-quarter profit is expected to plunge 92% to the lowest for any quarter in 14 years, estimates show ahead of the Korean tech giant’s results.
The forecast comes as a chip glut worsens and buyers like data centres and computer makers slow purchases amid a global economic slowdown.
The world’s biggest maker of memory chips, TVs and smartphones as of 2022 is a bellwether for global consumption trends. It is expected to announce preliminary first-quarter results on Friday and full results later this month, in what is typically a seasonally weak period.
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Samsung’s operating profit likely fell to 1.08 trillion won in the quarter ended March 31, according to a Refinitiv SmartEstimate from 27 analysts, weighted toward those who are more consistently accurate.
That is lowest since a 590 billion won profit in the first quarter of 2009, according to company data, and compares with an operating profit of 14.12 trillion won last year.
Operating profit at Samsung’s mobile business likely fell by 9% to 3.46 trillion won in the March quarter, an average of seven analyst estimates showed.
While demand for smartphones is sluggish overall, premium models are more resilient, analysts said.
Profits were supported by the higher-margin flagship models including the S23 series launched during the quarter, which accounted for about 20% of total sales, IBK Investment & Securities analyst Kim Woon-ho said.
Chip division hit hardest
On the other hand, Samsung’s chip division likely reported quarterly losses of more than 3 trillion won ($2.3 billion). The decline follows falling memory chip prices and lower inventory values, analysts say.
Prices of DRAM memory chips, widely used in smartphones, PCs and servers plunged about 20% during the quarter. Prices for NAND flash chips used in data storage also fell about 10% to 15%, according to TrendForce data.
Clients including data centre operators, smartphone and personal computer makers are refraining from buying new chips and instead using up inventories, as consumer demand for tech devices remains sluggish due to rising inflation.
Chip buyers also remain conservative about making new investments as interest rates soar.
Rivals Micron Technology and SK Hynix have already slashed investment plans and expect the chip downturn to last at least until the second half of 2023.
Investment plans undeterred
In contrast to its rivals, Samsung has not yet changed its investment plans. Analysts have said the tech giant is using the opportunity to expand its market share lead over competitors so it can take advantage of an eventual rebound in demand.
Last month, the company said it was planning to invest around 300 trillion won ($230 billion) to develop “the world’s largest chip-making base” in South Korea.
Samsung said will make the investment over the next 20 years as South Korea looks to boost its national chip industry.
In February, Samsung Electronics also said it planned to borrow 20 trillion won from unit Samsung Display to use as operational funds until August 2025.
- Reuters, with additional editing by Vishakha Saxena
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