Samsung Profits Plummet 95% in Q1: Can the Tech Giant Bounce Back?

• ? Samsung Electronics’ operating profit fell to 640 billion won ($478.6 million) for Q1 2023, down 95% from 14.12 trillion won a year earlier and the lowest profit for any quarter in 14 years.
• ? Samsung’s semiconductor business reported a record loss on Thursday, driven by weak demand for tech devices.
• ? The South Korean tech giant’s chip division reported a 4.58 trillion won loss compared to an 8.45 trillion won profit a year earlier.
• ? Samsung Electronics flagged a gradual recovery for chips in the second half of the year, based on expectations of a gradual market recovery and a rebound in global demand.
• ? In Q1, Samsung’s mobile business reported a 3.94 trillion won profit, up from 3.82 trillion won a year earlier.
• ? Samsung shares fell 0.5% in morning trade, in line with the wider market.

Samsung Electronics, the world’s largest memory chipmaker, recently reported a staggering 95% plunge in profits for the first quarter of 2023. This was driven by weak demand for tech devices, causing a global downturn in semiconductor purchases and sending chip prices plummeting by about 70% over the previous nine months.

Samsung (SSNLF) chip division reported a 4.58 trillion won loss compared to an 8.45 trillion won profit a year earlier. However, Samsung is hopeful for a gradual recovery for chips in the second half of the year as customers may gradually start buying chips again.

Samsung has announced its plans to focus its chip business on high-capacity server and mobile products, based on expectations of a gradual market recovery and a rebound in global demand in the second half. For the current quarter, Samsung is expecting a limited recovery for memory chips as major data center firms invest more conservatively in servers. Despite the record loss in chips, Samsung said it spent 10.7 trillion won in capital expenditures during Q1, the highest for the first quarter of any year.

On the bright side, Samsung’s mobile business reported a 3.94 trillion won profit in Q1, up from 3.82 trillion won a year earlier. Samsung is focusing on profit rather than shipments as it meets more resilient demand for premium smartphones rather than volume.

Samsung has also recently unveiled its latest flagship smartphone, the Galaxy S23 lineup, with a powerhouse camera. In the second half, Samsung forecasts that the smartphone market would increase in both shipments and revenue as the global economy recovers. Samsung’s shares have risen about 16% year-to-date as investors anticipate a memory chip recovery in the second half of this year.

Despite the current challenges faced by Samsung’s chip division, the company remains committed to investing in memory semiconductors to secure mid- to long-term competitiveness. Samsung has spent 9.8 trillion won on chips as it sets up production in its Taylor, Texas, and Pyeongtaek, South Korea factories. Samsung Electronics plans to continue investing in memory semiconductors at a similar level to the previous year.

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