Samsung Electronics’ first-quarter profit is expected to plunge 92% to its lowest level in 14 years due to a worsening chip glut and a slowdown in purchases by buyers such as data centers and computer makers amid a global economic slowdown, according to Reuters.
Analysts said the launch of new flagship smartphones is expected to bolster mobile profits, but its chip unit could report a quarterly loss of more than 3 trillion won (currently about RMB 15.69 billion) due to falling memory chip prices and a sharp cut in the value of its inventory.
Samsung remains the world’s largest maker of memory chips, TVs and smartphones through 2022, and is a global trendsetter in consumer trends. Samsung is expected to report preliminary first-quarter results on Friday and full results later this month.
According to the 27-analyst Refinitiv SmartEstimate, Samsung Electronics’ first-quarter operating profit is likely to fall to 1.08 trillion won (currently about 5.648 billion yuan).
According to Samsung Electronics data, this is the lowest level of profit since the 59 billion won profit in the first quarter of 2009, compared with last year’s operating profit of 14.12 trillion won (currently about 73.848 billion yuan).
Prices of DRAM memory chips, which are widely used in smartphones, PCs and servers, plunged about 20% in the quarter, while prices of NAND flash chips, which are used for data storage, fell about 10 to 15%, according to consulting firm TrendForce.
Rivals Micron Technology and SK Hynix have cut back sharply on investment plans as a result, and the chip slump is expected to last until at least the second half of 2023. In contrast, Samsung has not changed its investment plans. Analysts said the tech giant is using the opportunity to expand its market share ahead of competitors in order to take advantage of the eventual rebound in demand.
In February, Samsung Electronics said it plans to borrow 20 trillion won (currently about RMB 104.6 billion) from Samsung’s display unit as working capital until August 2025.
The average estimate of seven analysts suggests that Samsung’s mobile business may see a 9% drop in first-quarter operating profit to 3.46 trillion won (currently about RMB 18.096 billion).
