Salem Radio Network News Wednesday, August 10, 2022

Business

Samsung Q2 solid on server-chip demand, smartphones cloud outlook

By Joyce Lee

SEOUL (Reuters) – Samsung Electronics Co Ltd is likely to turn in its best April-June profit since 2018 with a 15% year-on-year rise, as lingering demand for its memory chips from server customers offsets lower sales to inflation-hit smartphone makers.

Operating profit for the world’s biggest smartphone and memory-chip maker likely jumped to 14.46 trillion won ($11.2 billion) in the quarter, according to a Refinitiv SmartEstimate from 24 analysts, from 12.57 trillion won a year earlier.

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

On the overall outlook for global memory chip demand, Park Sung-soon, analyst at CAPE Investment & Securities, said U.S. data centre firms such as Amazon, Microsoft, Alphabet’s Google and Meta are expected to continue buying “to meet expanding demand for cloud services”.

Chip inventories at these companies are not high compared to 2018 levels, Park added.

Making a case for strong server demand, Taiwanese contract electronics supplier and Apple iPhone maker Foxconn on Monday raised its full-year outlook and said it was optimistic about the third quarter.

Still, chipmakers worldwide are facing cooling demand after two bumper pandemic years when people bought phones and laptops to work remotely, which resulted in a chip shortage and forced companies including automakers to pay top dollar for key chips, pushing their prices up.

Also, China’s recent COVID-19 lockdowns choked consumer demand and boosted inflation in the world’s No.2 economy, resulting in steep falls in smartphone sales.

Concerns about a downturn in major markets, including the United States, due to high inflation and the war in Ukraine are also prompting consumers and corporates to tighten budgets.

‘WEAKENED CONSIDERABLY’

Rival memory-chipmaker Micron Technology last week forecast much worse-than-expected quarterly revenue and said the market had “weakened considerably in a very short period of time”, though it was confident about long-term demand.

Data provider TrendForce said prices of specific DRAM chips, used in tech devices and servers, fell about 12% last month from a year earlier, signalling smaller margins for chipmakers in coming quarters.

Samsung’s mobile business profit is expected to have slipped some 17% to 2.7 trillion won from a year earlier, analysts said.

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

Industrywide shipments of smartphones to China – the world’s biggest smartphone market – are expected to shrink by 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% slump in the Philadelphia Semiconductor index.

($1 = 1,295.5600 won)

(Reporting by Joyce Lee in Seoul; Editing by Sayantani Ghosh and Himani Sarkar)

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