Baek Byung-yeul is a journalist at The Korea Times focused on cultural content, including films and cultural events in South Korea. You can contact him at baekby@koreatimes.co.kr to share your insights.
Samsung Electronics' Q2 operating profit inches down on sluggish smartphone, TV sales
Analysts expect firm's chip business to slow down in 2nd half
By Baek Byung-yeul
By Baek Byung-yeul
Samsung Electronics suffered a slight decrease in earnings in the second quarter from the previous three-month period, due to lower demand for its smartphones, TVs and other home appliances, according to tentative data the company unveiled Thursday.
Samsung released its preliminary earnings results for the April-June period, with sales falling 1 percent to 77 trillion won ($59.2 billion) and operating profit edging down 0.85 percent to 14 trillion won compared to the first quarter. Sales surged 20.94 percent year-on-year, while operating profit rose 11.38 percent.
Second-quarter sales were the second-highest in the company's history. The highest sales record so far was 77.78 trillion won achieved in the first quarter of this year.
The tech giant did not break down the earnings figures by business division. But industry analysts said Samsung was able to maintain solid earnings in the second quarter thanks to strong memory chip sales despite sluggish smartphone and home appliance earnings.
Samsung was able to maintain solid earnings in the first quarter thanks to its strong grip on memory chips, but concerns are growing over a slowdown in the semiconductor industry, because interest rates continue to rise, casting dark clouds over private consumption, according to analysts.
Analysts expected the chip business to slow down in the second half of 2022 due to a sharp drop in demand for smartphones and PCs caused by increasing interest rates, China's lockdown of major cities to prevent the spread of COVID-19 and the Russia-Ukraine war.
“Samsung is facing an environment where unfavorable external factors continue after the first quarter. Concerns over sluggish IT demand are growing due to the possibility of an economic slowdown,” Park Sung-soon, an analyst at Cape Investment & Securities, said.
Global smartphone makers are reducing purchases of components, including chips, to reduce their inventory levels due to low demand. Industry watchers project PC sales to decrease by 10 percent year-on-year.
Due to these unfavorable factors, the growth rate of DRAM memory chip shipments, which were predicted to increase 18.7 percent in 2022 from a year, has been revised down to 14.7 percent.
Despite negative factors, Samsung Display, a subsidiary of Samsung Electronics that oversees the company's monitor business, was estimated to generate a decent operating profit of between 800 billion won and 900 billion won, thanks to displays supplied to Apple's mobile devices, which continue to enjoy robust global demand.
Lee Seung-woo, head of research at Eugene Investment & Securities, pointed out that chances are growing that a U.S. interest hike will trigger a global economic slowdown and further burden the Korean chipmaker in the second half of 2022.