Samsung Q2 2023: Sales Decline & Profit Drop

Samsung Electronics has released its performance expectations for the second quarter of 2023, targeting electronic components distributors. The company anticipates sales of 60 trillion Korean won (approximately 332.58 billion Chinese yuan), a 22.3% decline compared to the same period last year. The operating profit is expected to be 6 trillion Korean won (approximately 33.3 billion Chinese yuan), a significant drop of 95.7% year-on-year but higher than analysts' estimates.

The global semiconductor market, including storage chips, has experienced a decline in demand since the second half of 2022. As a result, major players like Armor Hero, Micron, and SK Hynix have reduced production. In the first quarter of this year, Samsung witnessed a substantial 96% year-on-year decline in operating profit due to low demand and falling prices for storage chips, hitting a record low since 2019. Samsung's chip business reported a loss of 4.58 trillion Korean won (approximately 25.4 billion Chinese yuan), leading to the decision to implement production cuts.

Despite other manufacturers already implementing production reductions, Samsung's actions came relatively later. Coupled with the slow recovery in market demand, Samsung's operating profit for the second quarter experienced a 95.7% year-on-year decline. However, analysts believe that the losses in Samsung's storage chip business might reduce in the second quarter due to increased sales of DRAM chips for PCs, smartphones, and servers. As the production cuts take effect, the third quarter is expected to show a significant improvement in Samsung's performance.

According to Sanjeev Rana, an analyst from Lyon Securities, the second quarter represents the bottom of the profit cycle for Samsung in the current downturn of the storage chip market. Rana expects profits to rebound in the second half of the year as the decline in chip prices slows down and demand begins to recover.

Giuni Lee, an analyst from Goldman Sachs, suggests that the most significant loss for Samsung's semiconductor business was in the first quarter. Lee predicts that as the losses gradually decrease, the fourth quarter could potentially achieve modest profitability.

TrendForce's latest research indicates that as DRAM suppliers progressively reduce production and overall supply decreases, combined with seasonal demand, the decline in DRAM prices is expected to narrow to within 5% in the third quarter. Similarly, as original manufacturers continue to cut NAND Flash production, the decline in NAND Flash prices is projected to narrow to a range of 3-8% in the third quarter. The fourth quarter is expected to see a halt to the decline and a potential rebound in NAND Flash prices.