Samsung’s profit plunged 95% to its lowest level since 2009 as chip demand slumps

South Korean electronics big Samsung’s working revenue plunged within the first quarter as costs for its reminiscence chips continued to fall and demand remained weak.

Here are Samsung’s earnings at a look within the first quarter: 

Revenue: 63.75 trillion Korean received (about $47.6 billion), down 18% year-on-year. That is on par with Samsung’s personal steerage of roughly 63 trillion Korean received however under the 63.9 trillion received anticipated by analysts, in accordance with Refinitiv consensus estimates.

Operating revenue: 640 billion Korean received (roughly $478.55 million), down from 14.12 trillion received a 12 months earlier. The firm issued steerage earlier this month saying Q1 revenue can be 600 billion Korean received.

This is the corporate’s lowest working revenue for the reason that first quarter of 2009.

Traditionally, Samsung’s largest revenue driver is its semiconductor division which consists of gross sales of reminiscence chips that go into every part from private computer systems to smartphones to servers in knowledge facilities.

Samsung posted a 4.58 trillion Korean received loss at its semiconductor business versus a 8.45 trillion received revenue in the identical interval final 12 months.

During the pandemic, smartphone and PC makers stockpiled chips as demand for shopper gadgets elevated, however they’re now grappling with extra inventories as shoppers in the reduction of on purchases of those items as a result of rising inflation. This has led to a fall in costs for the reminiscence chips that Samsung sells.

The South Korean big stated this month it might be making a “meaningful” minimize in reminiscence chip manufacturing, following the lead of smaller rivals resembling SK Hynix and Micron.

“Samsung Electronics announced the disappointing number for the first quarter, but at the same 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 informed CNBC’s “Squawk Box Asia” on Thursday.

Samsung did nonetheless forecast a restoration within the second-half of the 12 months.

“Demand is expected to gradually recover in 2H amid projections that customer inventory levels will have declined,” Samsung stated.

Samsung stated it expects restricted demand restoration as large-scale knowledge facilities make investments extra conservatively and clients proceed to regulate inventories. Samsung additionally expects launches of latest smartphones, PC promotions and growth of latest CPU adoption to spice up reminiscence chip demand.

SK Hynix, a competitor to Samsung, additionally guided for a restoration in reminiscence chips when it reported a report quarterly loss on Wednesday,

“If we got a rebound, it’s mostly driven by the production cut and some restocking demand. So we see, despite the disappointing earnings number, some positive investor sentiment on the stock,” stated Kim.

Samsung’s inventory was round 0.6% larger on Thursday.

During the primary quarter, Samsung launched its newest strains of flagship smartphones known as the S23 collection, which gave its cell division a lift.

Revenue at its cell business grew 22% versus the earlier quarter to 30.74 trillion received, however was down 2% versus the identical interval final 12 months. Operating revenue got here in at 3.94 trillion received, up 3% year-on-year.

Samsung was helped by gross sales of its highest priced smartphone — the $1,200 S23 Ultra.

“The premium market grew in terms of both volume and value even amid weak smartphone demand caused by lingering macro uncertainties,” Samsung stated in a press release. “Sales grew and profitability recovered to reach double-digits on the back of strong sales of new premium models, centering on S23 Ultra, and efforts to enhance operational efficiencies.”

Overall, Samsung’s smartphone division appeared to stay resilient amid an general powerful quarter for the business. Shipments of smartphones fell 13% year-on-year within the first quarter of the 12 months, in accordance with knowledge launched Thursday by market analysis agency Canalys. Samsung reclaimed the highest spot globally when it comes to smartphone market share, Canalys stated.

Samsung is the most recent tech firm globally to report earnings after numbers from U.S. expertise giants Alphabet, Microsoft and Meta.

Daniel Yoo, head of worldwide asset allocation at Yuanta Securities Korea, pointed to sturdy outcomes from these American tech companies.

Meta noticed first-quarter gross sales boosted by promoting from Chinese firms whereas Microsoft posted third-quarter outcomes that beat analyst expectations on each the highest and backside strains.

“I do think that the recovery story is coming. And the good factor is that despite such poor profit numbers coming through, we are seeing sharp prices stabilizing,” Yoo stated on CNBC’s “Street Signs Asia” on Thursday.