April 30, 2024

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The Samsung D'light exhibition at the Samsung Electronics building in Seocho district in Seoul (Yonhap)

Samsung Electronics has predicted an operating profit of 600 billion won ($458.5 million) for the April-June period, a 96 percent plunge to what would be the lowest quarterly earnings in 14 years, amid a severe global downturn in the chip industry.

Releasing its earnings guidance on Friday for the second quarter this year, the tech giant said its consolidated sales is expected to be approximately 60 trillion won, down 22.3 percent on-year.

As for the operating profit, the estimate is the worst since the 590 billion won in the first quarter of 2009. The estimate was higher than the consensus of 181.3 billion won by local analysts provided by market intelligence Yonhap Infomax.

In the first quarter this year, Samsung logged 640.2 billion won, down 95.5 percent on-year.

Each division’s estimated figures were not available for Friday’s earnings guidance. But market watchers said the dismal earnings could have been pulled down by an operating loss of 3 to 4 trillion won in its semiconductor division. Sluggish sales in mobile devices during the period could also be one of the factors affecting the profit loss.

KB Securities estimated Samsung's Device Solution Division in charge of the tech giant's semiconductor business to log an operating loss of 3.3 trillion won, while its Mobile eXperience Division, overseeing the mobile devices and smartphones, to record an operating profit of 2.7 trillion won. The Consumer Electronics Division is expected to have posted 500 billion won during the period as Harman, the car infotainment subsidiary, is expected to log 300 billion won in operating profit.

KB Securities analyst Kim Dong-won said Samsung's chip business is expected to improve as DRAM shipment in the second quarter rose by 20 percent when compared to the previous quarter.

Market analysts, however, assume earnings will improve in the second half of this year, with the chip deficit expected to go down with the increase in DRAM memory shipment. Samsung is also expected to see its chip inventory decrease in the coming months, as it has announced it would cut production to a "meaningful level" to adjust the overflow.

The company will release a detailed second-quarter earnings report at the end of this month.

In a staff meeting on Wednesday, Samsung Electronics CEO Kyung Kye-hyun, who leads the DS division, stressed that its latest High Bandwidth Memory products will help boost profit.

"HBM3 and HBM3P is expected to contribute to increasing the DS division profit next year,” Kyung said.

"The market share of Double Data Rate 5 will also surpass the average market share of DRAM at Samsung by the end of this year."

By Jo He-rim (herim@heraldcorp.com)