Samsung Q2 strong on server chip demand, smartphone cloud outlook

The logo of Samsung Electronics is seen at its office building in Seoul, South Korea March 23, 2018. REUTERS/Kim Hong-Ji

Join now for FREE unlimited access to Reuters.com

  • Profit likely up 15% to 14.46 trillion won -Refinitiv SmartEstimate
  • It would be the highest April-June profit since 2018
  • Second-quarter chip revenue likely soared 49%, analysts say
  • Earnings from mobile business expected to drop around 17%, analysts say

SEOUL, July 5 (Reuters) – Samsung Electronics Co Ltd (005930.KS) is likely to post its best April-June profit since 2018 with a 15% year-on-year increase as continued demand for its memory chips from server customers offsets lower sales to smartphone makers hit by inflation.

Operating profit at the world’s largest maker of smartphones and memory chips likely jumped to 14.46 trillion won ($11.2 billion) in the quarter, according to a Refinitiv SmartEstimate of 24 analysts, from 12, 57 trillion won a year earlier.

Its chip revenue likely jumped 49% to 10.3 trillion won, according to an average of seven estimates. The chip business accounts for about half of the South Korean tech giant’s profits.

Join now for FREE unlimited access to Reuters.com

Regarding the overall outlook for global demand for memory chips, Park Sung-soon, analyst at CAPE Investment & Securities, said that US data center companies such as Amazon (AMZN.O)Microsoft (MSFT.O)Google of the Alphabet (GOOGL.O) and meta (META.O) should continue to buy “to meet the growing demand for cloud services”.

Those companies’ chip inventories are not high compared to 2018 levels, Park added.

Citing high demand for servers, Taiwanese contract electronics supplier and Apple iPhone maker Foxconn (2317.TW) Monday raised its outlook for the full year and said it was optimistic for the third quarter. Read more

Yet chipmakers around the world are facing a drop in demand after two bumper pandemic years when people bought phones and laptops to work remotely, leading to chip shortages and constraining companies, including automakers, to pay top dollar for key chips, driving up their prices. Read more

Additionally, recent COVID-19 lockdowns in China have stifled consumer demand and spurred inflation in the world’s second-largest economy, leading to a sharp decline in smartphone sales. Read more

Concerns about a slowdown in major markets, including the United States, due to high inflation and the war in Ukraine are also prompting consumers and businesses to tighten their budgets.

“CONSIDERALLY WEAKENED”

Rival memory chip maker Micron Technology (MU.O) Last week, he forecast much worse than expected quarterly earnings and said the market had “weakened significantly in a very short time”, although he was confident about long-term demand. Read more

Data provider TrendForce said prices for specific DRAM chips, used in tech devices and servers, fell about 12% last month from a year earlier, signaling lower margins for device makers. chips over the next few quarters.

Profits from Samsung’s mobile business are expected to have fallen about 17% to 2.7 trillion won from a year earlier, analysts said.

They expect the company’s smartphone shipments to have fallen to between 61 million and 68 million units in the second quarter, from 74 million in the first.

According to Gartner, industry-wide smartphone shipments to China – the world’s largest smartphone market – are expected to decline 18% this year.

Shares of Samsung, which will report preliminary results on Thursday, have fallen about 27% this year, compared to a 38% drop in the Philadelphia Semiconductor index. (.SOX).

($1 = 1,295.5600 won)

Join now for FREE unlimited access to Reuters.com

Reporting by Joyce Lee in Seoul; Editing by Sayantani Ghosh and Himani Sarkar

Our standards: The Thomson Reuters Trust Principles.

Leave a Comment