Samsung Electronics has reported a significant decline of over 95 percent in operating profits in the second quarter owing to weak demand for memory chips. The second-quarter results of the South Korean tech giant mark its lowest quarterly profit since 2009.
Samsung Group is the largest among the family-controlled conglomerates that play a dominant role in the business landscape of Asia’s fourth-largest economy.
Samsung Electronics reported a significant decline in operating profit for the second quarter, reaching 668.5 billion won ($523.5 million). In the same period the previous year, the firm recorded a profit of 14.1 trillion won ($11 trillion). Net profit also fell by 84.5 percent to 1.72 trillion won ($1.35 trillion). At the same time, sales dropped 22.3 percent to 60 trillion won ($47 trillion).
The decline in profit is attributed to weak demand for memory chips amid the global economic slowdown. However, the company remains optimistic about the second half of the year. It is expecting a gradual recovery in global demand that would lead to an improvement in earnings. Nevertheless, Samsung acknowledges that continued macroeconomic risks could pose challenges.
South Korean chipmakers, including Samsung, experienced record profits in recent years due to surging prices for their products. However, the pandemic-induced demand for computers and smartphones during lockdowns boosted chip sales, leading to increased production by chipmakers.
As lockdowns lifted and inflation soared, the demand for memory chips quickly diminished, impacting Samsung Electronics’ profit. The company expects output to decrease by approximately 9.3 percent this year due to the weak overall economy. Consumer demand has weakened, leading to budget cuts by companies and order cancellations.
To tackle the declining prices of chips, chipmakers like Samsung plan to tighten supply in the second half of the year. This move is anticipated to slow down the rate of price declines.
Despite the recent drop in profits, Samsung remains committed to making significant investments. In March, the company announced plans to contribute $227 billion over the next two decades to establish the world’s largest chip center in Yongin, south of Seoul.
