October 2, 2022

Samsung Electronics’ logo appears at its headquarters in Seoul, South Korea, April 4, 2016. REUTERS/Kim Hong Ji

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  • Profits likely to rise 15% to 14.46 trillion won – Refinitiv SmartEstimate
  • This will be the highest profit from April to June since 2018
  • Chip earnings in the second quarter are likely to rise 49%, analysts estimate
  • Mobile business profit likely to fall 17%, analysts estimate

SEOUL, July 5 (Reuters) – Samsung Electronics Co Ltd (005930.KS) is likely to post its best April-June profit since 2018 with a 15% year-over-year increase, as demand for its server memory chips continues to grow. Customers are offsetting lower sales by inflation-hit smartphone makers.

Operating profit for the world’s largest maker of smartphones and memory chips likely jumped to 14.46 trillion won ($11.2 billion) in the quarter, according to a Refinitiv SmartEstimate report from 24 analysts, from 12.57 trillion won a year earlier.

Its chip earnings are likely up 49% to 10.3 trillion won, according to an average of seven estimates. The chip business accounts for about half of the South Korean tech giant’s profits.

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Regarding the general outlook for global demand for memory chips, Park Sung-soon, an analyst at CAPE Investment & Securities, said US data center companies such as Amazon (AMZN.O), Microsoft (MSFT.O), Alphabet’s Google (GOOGL.O) and Meta (META.O) is expected to continue buying “to meet the growing demand for cloud services.”

Park added that chip stocks at these companies are not high compared to 2018 levels.

In order to demonstrate strong server demand, Taiwanese contract electronics supplier and iPhone maker Foxconn (2317.TW) on Monday raised their full-year forecasts and said they are optimistic about the third quarter. Read more

However, chip makers around the world are facing cold demand after two years of a bumper pandemic when people bought phones and laptops to work remotely, which led to chip shortages and forced companies including automakers to pay the highest price for major chips, causing led to an increase in their prices. Read more

Also, the recent lockdowns in China due to the novel coronavirus have stifled consumer demand and boosted inflation in the world’s No. 2 economy, leading to a sharp drop in smartphone sales. Read more

Concerns about deflation in key markets, including the United States, due to rising inflation and the war in Ukraine are also prompting consumers and businesses to tighten budgets.

weak in mind

Rival memory chip maker Micron Technology (MU.O) last week forecast much worse-than-expected quarterly returns and said the market “has weakened significantly in a very short period of time,” although it is confident of long-term demand. Read more

Data provider TrendForce said prices for select DRAM chips, used in technical hardware and servers, fell about 12% last month from a year earlier, suggesting smaller profit margins for chipmakers in the coming quarters.

Analysts said that Samsung’s mobile business profit is expected to slump about 17% to 2.7 trillion won from a year earlier.

They expect the company’s smartphone shipments to fall to between 61 million and 68 million in the second quarter from 74 million in the first.

Industry-wide smartphone shipments to China – the world’s largest smartphone market – are expected to shrink 18% this year, according to Gartner.

Shares in Samsung, which will announce preliminary results on Thursday, have fallen about 27% this year, versus a 38% decline in the Philadelphia Semiconductor (.SOX) index.

(1 dollar = 1,295.5600 won)

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(Covering by Joyce Lee in Seoul). Editing by Sayantani Ghosh and Himani Sarkar

Our criteria: Thomson Reuters Trust Principles.

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