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Second Quarter Generates Positive Numbers for Samsung But Phone Demand Still Subpar

Mark Pierre by Mark Pierre
August 1, 2022
in Business
113,635
Second quarter examination shows numbers last seen in 2018, but smartphone demand remains stagnant

Second quarter examination shows numbers last seen in 2018, but smartphone demand remains stagnant

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While business was sluggish for companies across multiple sectors, Samsung Electronics improved its earnings from April to June and posted excellent second-quarter results for the first time since 2018.

Despite the inflation, the company has achieved strong sales of memory chips for server customers. As a result, the memory chip and smartphone maker’s shares rose 2.5% after announcing preliminary second-quarter results, while the broader market rose 1.5%.

Samsung reported an operating income of 14 trillion won, or $ 10.7 billion, up 11% from the previous year. In line with estimates, turnover also grew by 21%.

The company had a strong quarter during a tough time for chipmakers, who warned of an impending deluge of customer chips piling up to meet growing demand from people working from home during the pandemic.

Chipmakers like Micron and Advanced Micro Devices are reporting falling demand as inflation weighs on spending.

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

Data provider TrendForce reports that some DRAM chip prices fell about 12% in the past month, while NAND flash chip prices are expected to drop 5% between July and September compared to last quarter.

Server chip sales mark the peak of Samsung’s business as inflation, the possibility of a slowdown in key markets, the Russian invasion and the COVID-19 lockdown in China weighed on Samsung phone sales. Additionally, tech companies like Amazon, Google, Alphabet’s Meta, and Microsoft have played a vital role in Samsung’s revenue by buying chips to meet cloud demand.

On the other hand, Foxconn, a Taiwanese electronics supplier and iPhone maker for Apple, recently updated its full-year outlook and expressed optimism for the third quarter.

The value of the US dollar also hit a 20-year high, boosting Samsung’s second-quarter chip gains as tokens are sold in dollars, which are converted into Korean headquarters figures.

Second-quarter smartphone shipments were estimated at 62-64 million, down 5-8% from the March estimate. In the first quarter, Samsung shipped 74 million smartphones. The decline in smartphone demand is the result of 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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Mark Pierre

Mark Pierre

Mark Pierre is a talented writer with a passion for analyzing and writing about current events. With a keen interest in politics, economics, and social issues, Mark delivers insightful and thought-provoking content that stimulates critical thinking and informed discussion. His writing is informative and engaging, offering readers a nuanced perspective on the most pressing issues of our time.

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