Samsung Electronics, the world’s largest manufacturer of memory chips, smartphones, and televisions, has announced that it is expecting a significant decline in its second-quarter operating profit. The preliminary earnings outlook indicates a 96% drop compared to the previous year, marking its weakest performance in over 14 years.

Despite efforts to address a glut in chip supply by reducing production, the South Korean tech giant continues to face challenges due to weak global demand for tech products and semiconductors. Samsung estimates its operating profit for the April-June period to be 600 billion won ($458.2 million), making it the company’s worst quarterly earnings result since Q1 2009. In contrast, the second quarter of 2022 recorded an operating profit of KRW14.100 trillion.

Additionally, Samsung anticipates a 22% year-on-year decrease in revenue, amounting to KRW60 trillion for the June quarter.

However, in a positive turn, the company’s preliminary operating-profit forecast surpasses the market consensus estimate compiled by FactSet, which projected KRW217.33 billion for the quarter.

Market analysts believe that the global tech-industry downturn is nearing its end, noting that the recent decline in chip prices has eased. Furthermore, while global semiconductor makers are reducing supply to stabilize memory chip prices, demand for powerful computing chips used in artificial intelligence applications remains strong.

Citigroup analyst Peter Lee expressed optimism in a research note, predicting better-than-expected earnings for Samsung throughout the year. Lee expects a solid recovery in the memory-chip market during the second half of the year and a resilient smartphone business to contribute to Samsung’s performance.

Samsung is scheduled to release its full quarterly earnings report later this month.

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Source: The Wall Street Journal

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