Despite Lower Smartphone Demand, Samsung Managed Impressive Numbers During the Second Quarter

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While business has been slow for many, Samsung Electronics managed to crunch in better numbers from its April-June profit – a feat last seen in 2018.

Despite the inflation, the company generated strong sales thanks to memory chips for server customers. As a result, shares of the memory-chip and smartphone makers rose 2.5% after preliminary results for the second quarter were announced against a 1.5% rise on the broader market.

Samsung posted an operating profit of 14 trillion won or $10.7 billion, an 11% increase from last year’s profits. Revenue also rose 21%, in line with estimates.

The company managed a strong quarter amid a struggling time for chipmakers who warned about a looming chip glut at customers who stocked up during the pandemic to meet the higher demand from people working from home.

Chipmakers like Micron and Advanced Micro Devices have signaled waning demand as inflation squeezes spending.

“Memory chipmakers are expected to build inventory and hike shipments when prices rebound, and demand recovers next year,” said Cape Investment analyst Park Sung-Soon.

Data provider TrendForce reports that prices of specific DRAM chips fell by about 12% last month, while prices of NAND Flash chips are projected to fall 5% in July-September from last quarter.

The sales made server chip demands mark the highlight for Samsung’s operations as inflation, the possibility of a downturn in major markets, the Russian invasion, and China’s COVID-19 lockdowns have held back Samsung phone sales.

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Tech companies like Amazon, Alphabet’s Google, Meta, and Microsoft have played an integral role in Samsung’s profits, buying chips to meet cloud demand.

On the opposite end of the table, Taiwanese contract electronics supplier and Apple iPhone maker Foxconn recently raised its full-year outlook and expressed optimism for the third quarter.

The US dollar’s value also hit a 20-year high, helping Samsung’s chip profits in the second quarter. The chip sales are mainly made in dollars, which, when converted, contribute to the Korean headquarters’ numbers.

Smartphone shipments in the second quarter were estimated to be between 62 to 64 million, 5 to 8% lower than estimation in March. In the first quarter, Samsung shipped 74 million smartphones. The lower smartphone demand can be attributed to inflation.

“This trend is the same for major global smartphone makers, although there is variance to some degree,” said Jene Park, Senior analyst at Counterpoint. “In particular, the hit to the demand for low- and mid-end smartphones seems more severe.”

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