Samsung Faces Challenging Times: Q2 2023 Sees Another 95% Profit Drop
Samsung, a name synonymous with electronics such as with smartphone and storage solutions, has been facing significant challenges in recent times. After experiencing a crushing 95% year-over-year profit drop in Q1 2023, the company’s Q2 performance isn’t any better. Samsung’s earnings report for Q2 2023 reveals a profit of KRW 0.67 trillion (RM2.37 billion / $524.9 million), another alarming 95% drop compared to the KRW 14.1 trillion (RM49.8 billion / $10.7 billion) profit it made in the same quarter last year.
Q2 2023: Samsung Sees Another 95% Profit Drop
One key aspect to understand about Samsung’s financial structure is that, despite its diverse product portfolio, the company heavily relies on its memory division. In more normal times, memory (NAND and RAM) accounted for 55% of profits, followed by mobile at 22%, and displays at 11%. Samsung’s LSI division, responsible for the foundry and Exynos chips, contributed 6.9%, while other consumer electronics made up only 4% of profits.
The consecutive 95% profit declines were expected, as Samsung grapples with a surplus of unsold chips, leading to decreased prices and profits. During the pandemic, memory companies stockpiled chips, and some anticipated the end of the boom times, thus cutting production in November 2022. However, Samsung delayed its production cut until April 2023, which led to a significant accumulation of unsold inventory. In response to this challenge, Samsung has now announced another round of memory production cuts to regain control over its inventory. While the company’s other divisions contributed to a small profit in the first half of 2023, the memory division posted an operating loss of $7 billion for the year so far.
Despite the challenging financial landscape, Samsung’s overall revenue for Q2 2023 reached KRW 60.01 trillion (RM212.2 billion / $47 billion), indicating a 6 % decline from Q1. The drop is attributed to a decline in smartphone shipments, an issue that was highlighted in Q1 as well. Nevertheless, they remain optimistic, expecting global memory demand to recover in the second half of the year. Q2 was anticipated to be a turbulent period, much like Q1, and the company is determined to weather the storm and emerge stronger in the coming months.
Pokdepinion: It’s certainly a tough time for the industry, and as big as the Korean giant is, even they are affected by the whole situation. With the recent launch of their newest foldables, hopefully they can see some form of improvements here.
