Samsung Electronics on Thursday reported a fall of more than 95 percent in operational profits in the second quarter due to the weak demand for memory chips.
The firm is the emblematic subsidiary of the South Korean giant Samsung Group, with much, the largest of the family controlled by the family that dominate the businesses in the fourth largest economy in Asia.
The operational profits of the period from April to June were KRW 668.5 billion (approximately 3,800 million rupees), below KRW 14.1 billion (approximately rs. 89,072 million rupees) compared to the previous year, Samsung said in a statement.
This marks the worst quarterly gain of the company from the first quarter of 2009.
The net gain of the second quarter of Samsung fell 84.5 percent to KRW 1.72 billion, and sales fell 22.3 percent to 60 billion Wones.
The firm, one of the largest memory chips manufacturers and smarter smartphones in the world, blamed the weak demand for its mobile chips and phones, but offered an optimistic perspective for the rest of the year.
“The global demand is expected to be recovered gradually in the second half of the year, which should lead to an improvement in gains driven by the component business,” he said, but added “the continuous macroeconomic risks could be a challenge.”
South Korean chip manufacturers, led by Samsung, enjoyed record earnings in recent years as the prices of their products shot, but the global economic deceleration has hit the sales of memory chips.
The demand increased during the pandemic when consumers bought computers and smartphones during blockages, which led to chips manufacturers to increase production.
But the demand decreased rapidly as the blockades rose and weakened even more against the very high inflation and the increase in interest rates.
Joanne Chiao, an analyst at the Trendforce market research firm, said production would decrease even more, 9.3 percent, this year due to a weak general economy.
“The demand for consumers has weakened, which leads to budget cuts by companies and continuous cancellations,” Chiao added.
The tendency of the trend force predicts the decrease in DRAM chips, often used on PC and smartphones, to reduce the second half of the year as chip manufacturers harden after prices fell up to 18 percent in the second quarter.
In April, Samsung said he would make a “significant” cut in the production of memory chips, following the example of SK Hynix and Micron rivals.
The recent drop in profits has not deteriorate the company to make bold investments.
In March, he announced the plans to contribute $ 227 billion in the next two decades to build the largest chips center in Yongin, south of Seoul.
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