Samsung Electronics’ Q2 Profit Likely Rose 11 Percent on Solid Server Chip Demand

South Korea’s Samsung turned in its greatest April-June revenue since 2018 on Thursday, underpinned by robust gross sales of reminiscence chips to server prospects at the same time as demand from inflation-hit smartphone makers cools.

Shares of the world’s largest memory-chip and smartphone maker rose 2.5 % after preliminary outcomes for the second quarter had been introduced, versus a 1.5 % rise within the wider market.

Samsung posted an working revenue of KRW 14 trillion (roughly Rs. 85,135 crore), up 11 % from KRW 12.57 trillion (roughly Rs. 76,430 crore) a 12 months earlier, simply shy of a KRW 14.45 trillion (roughly Rs. 87,870 crore) SmartEstimate from Refinitiv. Income rose 21 % to KRW 77 trillion (roughly Rs. 4,67,900 crore), in keeping with estimates.

The robust quarter for Samsung comes at a time when different chipmakers have warned of a looming chip glut at prospects who stocked up in the course of the pandemic to satisfy larger demand from folks working from residence.

Chipmakers together with Micron and Superior Micro Gadgets have additionally just lately signaled waning demand as red-hot inflation squeezes spending.

“Reminiscence chipmakers are anticipated to construct stock and hike shipments when costs rebound and demand recovers subsequent 12 months”, stated Park Sung-soon, an analyst at Cape Funding & Securities.

Costs of particular DRAM chips, utilized in gadgets and servers, fell about 12 % final month from a 12 months in the past, based on knowledge supplier TrendForce. Costs of NAND Flash chips, used for knowledge storage, are additionally projected to fall as a lot as 5 % within the July-September interval from the earlier quarter.

Smartphone demand weakens

Rising inflation, issues a few downturn in main markets, the battle in Ukraine and China’s COVID-19 lockdowns have resulted in slowing smartphone gross sales, leaving server chip demand as the one brilliant spot, analysts stated.

Samsung’s income have been shielded as giant US tech corporations comparable to Amazon, Microsoft, Alphabet’s Google, and Meta that use a whole lot of knowledge middle providers saved shopping for chips to satisfy cloud demand, they added.

Making a case for robust server demand, Taiwanese contract electronics provider and Apple iPhone maker Foxconn on Monday raised its full-year outlook and stated it was optimistic concerning the third quarter.

A robust greenback, which hit a 20-year excessive, might have additionally aided Samsung’s chip income within the second quarter.

Samsung’s chip gross sales are made primarily in {dollars}, whereas it experiences its revenue in Korean received, so a agency buck interprets to larger chip earnings.

Estimated smartphone shipments by Samsung’s cellular enterprise within the second quarter had been about 62-64 million, about 5 % – 8 % decrease than a March estimate, Counterpoint Analysis stated, as inflation hit smartphone demand.

Samsung shipped 74 million smartphones within the first quarter.

“This development is identical for main world smartphone makers, though there may be variance to a point … Specifically, the hit to the demand for low- and mid-end smartphones appears extra extreme,” stated Jene Park, Senior analyst at Counterpoint.

© Thomson Reuters 2022

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