Samsung on the Mobile World Congress 2023 on March 2, 2023, in Barcelona, Spain. (Photo by Joan Cros/NurPhoto via Getty Images)
Joan Cros | Nurphoto | Getty Images
South Korean electronics giant Samsung’s operating profit plunged in the primary quarter as prices for its memory chips continued to fall and demand remained weak.
Listed here are Samsung’s earnings at a look in the primary quarter:
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Revenue: 63.75 trillion Korean won (about $47.6 billion), down 18% year-on-year. That’s on par with Samsung’s own guidance of roughly 63 trillion Korean won but below the 63.9 trillion won expected by analysts, in accordance with Refinitiv consensus estimates.
Operating profit: 640 billion Korean won (roughly $478.55 million), down from 14.12 trillion won a 12 months earlier. The corporate issued guidance earlier this month saying Q1 profit can be 600 billion Korean won.
That is the corporate’s lowest operating profit for the reason that first quarter of 2009.
Samsung sees memory recovery ahead
Traditionally, Samsung’s biggest profit driver is its semiconductor division which consists of sales of memory chips that go into every part from personal computers to smartphones to servers in data centers.
Samsung posted a 4.58 trillion Korean won loss at its semiconductor business versus a 8.45 trillion won profit in the identical period last 12 months.
Throughout the pandemic, smartphone and PC makers stockpiled chips as demand for consumer devices increased, but they at the moment are grappling with excess inventories as consumers reduce on purchases of those goods resulting from rising inflation. This has led to a fall in prices for the memory chips that Samsung sells.
The South Korean giant said this month it could be making a “meaningful” cut in memory chip production, following the lead of smaller rivals similar to SK Hynix and Micron.
“Samsung Electronics announced the disappointing number for the primary quarter, but at the identical time, they announced a meaningful production cut amid the severe memory chip downturn. After that, the market reacted positively on the news,” SK Kim of Daiwa Securities Capital Markets told CNBC’s “Squawk Box Asia” on Thursday.
Samsung did nonetheless forecast a recovery within the second-half of the 12 months.
“Demand is predicted to regularly recuperate in 2H amid projections that customer inventory levels could have declined,” Samsung said.
Samsung said it expects limited demand recovery as large-scale data centers invest more conservatively and customers proceed to regulate inventories. Samsung also expects launches of recent smartphones, PC promotions and expansion of recent CPU adoption to spice up memory chip demand.
SK Hynix, a competitor to Samsung, also guided for a recovery in memory chips when it reported a record quarterly loss on Wednesday,
“If we got a rebound, it’s mostly driven by the production cut and a few restocking demand. So we see, despite the disappointing earnings number, some positive investor sentiment on the stock,” said Kim.
Samsung’s stock was around 0.6% higher on Thursday.
S23 Ultra gives mobile a lift
Throughout the first quarter, Samsung launched its latest lines of flagship smartphones called the S23 series, which gave its mobile division a lift.
Revenue at its mobile business grew 22% versus the previous quarter to 30.74 trillion won, but was down 2% versus the identical period last 12 months. Operating profit got here in at 3.94 trillion won, up 3% year-on-year.
Samsung was helped by sales of its highest priced smartphone — the $1,200 S23 Ultra.
“The premium market grew when it comes to each volume and value even amid weak smartphone demand brought on by lingering macro uncertainties,” Samsung said in a press release. “Sales grew and profitability recovered to succeed in double-digits on the back of strong sales of recent premium models, centering on S23 Ultra, and efforts to reinforce operational efficiencies.”
Overall, Samsung’s smartphone division appeared to stay resilient amid an overall tough quarter for the industry. Shipments of smartphones fell 13% year-on-year in the primary quarter of the 12 months, in accordance with data released Thursday by market research firm Canalys. Samsung reclaimed the highest spot globally when it comes to smartphone market share, Canalys said.
Tech recovery underway?
Samsung is the most recent tech company globally to report earnings after numbers from U.S. technology giants Alphabet, Microsoft and Meta.
Daniel Yoo, head of world asset allocation at Yuanta Securities Korea, pointed to strong results from these American tech firms.
Meta saw first-quarter sales boosted by promoting from Chinese firms while Microsoft posted third-quarter results that beat analyst expectations on each the highest and bottom lines.
“I do think that the recovery story is coming. And the great factor is that despite such poor profit numbers coming through, we’re seeing sharp prices stabilizing,” Yoo said on CNBC’s “Street Signs Asia” on Thursday.