The logo of Samsung Electronics is seen at its office building in Seoul, South Korea March 23, 2018. REUTERS/Kim Hong-Ji
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SEOUL, July 28 (Reuters) – Samsung Electronics Co Ltd (005930.KS) has warned that demand for chips from smartphone and PC makers will weaken further as people buy less, and more resilient demand from Server customers may also experience adjustments due to recession concerns.
As the world’s top memory chip and smartphone maker posted its best April-June operating profit since 2018 on strong demand for server chips, it said its mobile business saw profits fall. weaken due to geopolitical issues, inflation concerns, and higher component and logistics costs. Read more
“Servers (chip demand) are less affected by macroeconomic issues… But if a global recession occurs, server customers will also have to adjust their inventory,” said Jin-man Han, executive vice president of Samsung’s memory chip business at a conference. call.
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“Due to great uncertainty, we are constantly updating our forecasts,” he added.
Earlier, San Diego-based Qualcomm Inc (QCOM.O) warned of a big hit to fourth-quarter sales due to cooling demand for smartphones, adding to the chorus of voices warning of chip sales as searing inflation squeezes consumer spending.
Additionally, the Ukraine crisis and COVID-19 lockdowns in China, the world’s largest smartphone market, have compounded supply chain issues, forcing many phone makers to cut chip orders.
Samsung will respond to uncertainty with a “flexible” deployment of near-term capital spending and a disciplined supply of chips to meet demand, Han said without giving further details.
Cape Investment & Securities analyst Park Sung-soon said he expects “reduced capital spending from Samsung as well as SK Hynix for the next year in memory chips.”
However, Samsung was relatively optimistic about smartphone demand in the second half, saying the company’s supply disruptions had mostly been resolved and demand would remain flat or even grow in single digits.
It aims for foldable phone sales to overtake those of its former flagship smartphone, the Galaxy Note, in the second half of the year. It is expected to unveil its latest foldables on August 10.
BEST Q2 PROFIT SINCE 2018
Samsung’s operating profit rose to 14.1 trillion won ($10.8 billion) for the quarter ended June 30 from 12.57 trillion won a year earlier, its highest profit ever. second quarter since 2018 and also slightly higher than its own estimate of 14 trillion won.
The profit included chip profits of 9.98 trillion won and mobile business profits of 2.62 trillion won.
“Basic demand for servers (memory chips) will remain strong as investment in core infrastructure and new growth areas such as AI and 5G are expected to continue to expand, with a focus on core core companies. of data,” Samsung said.
TSMC (2330.TW), the world’s largest contract chipmaker, also touted demand for its high-tech chips used in data centers earlier this month. Read more
However, smaller rival SK Hynix 000660.KS said Wednesday that demand for server memory chips is likely to slow in the second half as data center customers deplete inventory while bracing for a recession. Read more
Samsung’s April-June revenue rose 21% to 77.2 trillion won.
A strong dollar also helped Samsung’s chip profits, boosting its operating profit by about 1.3 trillion won from the previous quarter, the company said.
Samsung’s chip sales are mostly in dollars, while it reports earnings in Korean won, so a firm greenback translates to higher chip revenue.
Shares of the company rose 0.7% in afternoon trading, compared to a 1% rise in the broader market (.KS11) and a 0.3% decline in SK shares Hynix, memory chip competitor.
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Reporting by Joyce Lee and Heekyong Yang; Editing by Himani Sarkar
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