Samsung Electronics Co. today reported a weaker-than-expected increase in operating profit in the fiscal second quarter, with reduced smartphone sales weighing on its results despite strong demand for its server chips.
In its preliminary second-quarter profit forecast, the company estimated operating profit at 14 trillion won ($11 billion), up 11% from a year earlier but just below analyst consensus of 14.5 trillion won.
Despite the setback, Samsung said it was its best second-quarter performance in four years. The company forecast total sales in the quarter of 77 trillion won, up 21% from a year ago and just above the consensus estimate of 76.7 trillion won.
Samsung, which is the world’s largest maker of memory chips and smartphones, did not provide a detailed breakdown of its respective business units, with its full earnings report to be released later this month.
However, it is known that Samsung continued to see strong demand for its memory chips during the quarter. The company manufactures both dynamic random-access memory, which is used in personal computers and servers, and NAND flash memory chips for smaller devices such as smartphones and USB drives. In the quarter, global DRAM shipments increased 9%, while NAND shipments increased 2%, according to Yonhap reported.
However, smartphone sales were hurt by inflation. Yonhap said a drop in consumer spending led to lower sales of smartphones and other products, such as televisions. Samsung’s revenue has been hit hard as a result.
Analysts estimate Samsung’s smartphone shipments at 61 million units, down 16% from the previous quarter. As such, the business unit’s operating profit is expected to fall to 2.6 trillion won from 3.2 trillion won a year ago.
Samsung is bracing for further declines later in the year, with the ongoing war in Ukraine, rising inflation, and ongoing COVID-19 related lockdowns in China hitting the global economy and reducing consumer spending. In light of these issues, Gartner Inc. recently forecast a 7.6% drop in shipments of consumer electronics devices such as smartphones and PCs.
Fears are growing that the negative outlook could have a ripple effect on the semiconductor industry, leading to weaker demand as consumer electronics brands struggle to move existing inventory. One of Samsung’s biggest rivals in the memory chip market, Micron Technology Inc., warned investors last week that it expects its fiscal fourth-quarter profit and revenue to be well below expectations.