Samsung investors brace for worst profit in over 14 years

BLOOMBERG

Samsung Electronics Co is heading for its lowest profit since the global financial crisis, if not longer, due to a sharp slowdown in tech demand that triggered losses at its semiconductor division.
The South Korean chipmaker, which reports preliminary results for the March quarter, is expected to say operating profit plummeted about 90% to 1.45 trillion won ($1.1 billion), according to analyst estimates compiled by Bloomberg. That would be the smallest profit since 2009. Several profit projections are below 1 trillion won and in some cases just slightly above breakeven.
While the semiconductor industry is known for its boom-and-bust cycles, it endured one for the history books during the Covid era. Demand soared during the pandemic as consumers bought new computers and smartphones, prompting chipmakers like Samsung to crank up production. But sales tumbled as lockdowns lifted and then shrivelled more with soaring inflation, rising interest rates and other global economic trauma.
That left the $160 billion memory chip industry with a yawning mismatch between supply and demand. Inventories spiked. Prices for Dram and Nand tumbled. Samsung, the biggest player in memory chips, is expected to lose $2.7 billion in its semiconductor division.
“The biggest problem right now is that chip inventories are too high and, in order to reduce them, the company will have to cut production,” said Lee Seung-woo, analyst at Eugene Investment & Securities.
Prices for Dram, a type of memory used to process data in computers and phones, slid 20% in the first quarter and are expected to drop 10% to 15% in the second quarter, according to market research firm TrendForce.