Samsung expects second-quarter profit to plunge more than 95 percent

Samsung Electronics said Friday it expects second-quarter operating profits to fall more than 95 percent on-year to their lowest level in 14 years, as a global glut of semiconductors continues to hurt its core memory sector.

The firm is the flagship subsidiary of South Korean giant Samsung Group, by far the largest of the family-controlled conglomerates that dominate business in Asia's fourth-largest economy.

The tech giant said in a regulatory filing that April-June operating profits were expected to drop 95.7 percent to 600 billion won ($458 million).

It would be their lowest profit since the first quarter of 2009's 590 billion won, a Samsung spokesman told AFP.

Sales are expected to drop 22.3 percent to 60 trillion won, the company added.

South Korean chipmakers, led by Samsung, have experienced record profits in recent years as prices have skyrocketed, but the global economic slowdown has harmed memory sales.

Prices of DRAM chips, which are often used in PCs and smartphones, continued to decline in the quarter -- falling around 13 to 18 percent, according to Taipei-based market researcher TrendForce.

"The demand for memory is bottoming out with slower-than-expected demand coupled with the inventory in the market, which is still being cleared out since January," Neil Shah, an analyst at Counterpoint research, told AFP.

"This is a full U-turn from last year when the memory division contributed to more than a third of the profit," he added.

The announcement comes as securing supplies of advanced chips has become a crucial issue internationally, with the United States and China locked in a fierce battle for control of the market.

China's trade ministry on Monday said exports of two rare metals vital for making semiconductors -- of which Beijing is a major producer -- would require a license from August 1 in the name of "security and national interests."

But "curbs by China on Samsung's rivals such as Micron... could drive some tailwinds for Samsung," analyst Shah said.

"We estimate the demand and supply balance at the end of this year and next year should be back to pre-pandemic levels, though not the significant post-pandemic uptick the industry witnessed in 2021 and 2022," he added.

And the company's "high cash buffer remains an important support for its credit quality given the cyclicality and large capex needs of its businesses," Gloria Tsuen, vice president and senior credit officer at Moody’s Investors Service told AFP.

Samsung is expected to release its final earnings report at the end of this month.