Samsung warns of weaker chip demand for phones and PCs as people buy less

The Samsung Electronics logo is seen at its office building in Seoul, South Korea, March 23, 2018. REUTERS/Kim Hong-Ji

SEOUL, July 28 (Reuters) – Samsung Electronics Co Ltd (005930.KS) It warned that chip demand from smartphone and PC makers would weaken further as people buy less, and more resilient demand from server customers could also see adjustments amid recession concerns.

While the world’s leading smartphone and memory chip maker posted its best April-June operating profit since 2018 on strong demand for server chips, it said its mobile business saw weakening earnings amid geopolitical woes. , inflation concerns, and higher component and logistics costs. read more

“Server (chip demand) is less affected by macro issues… But if a global recession occurs, server customers will also have to adjust their inventory,” Jin-man Han, executive vice president of the Samsung’s memory chip business. to call.

“Due to high uncertainty, we are constantly updating our forecast,” he added.

Formerly Qualcomm Inc, based in San Diego (QCOM.O) warned of a hit to fourth-quarter sales from cooling smartphone demand, adding to the chorus of voices warning of chip sales as red-hot inflation curbs consumer spending.

In addition, the Ukraine crisis and COVID-19 lockdowns in China, the world’s largest smartphone market, have worsened supply chain hurdles, forcing many phonemakers to cut chip orders. .

Samsung will respond to the uncertainty with a “flexible” deployment of short-term capital expenditures and a disciplined supply of chips to match demand, Han said without elaborating.

An analyst at Cape Investment & Securities, Park Sung-soon, said he expects “capex cuts by Samsung and SK Hynix next year in the memory chip business.”

Samsung, however, was relatively optimistic about smartphone demand in the second half, saying the company’s supply disruptions had mostly been resolved and demand would remain flat or even see growth of just one. digit.

Its goal is for foldable phone sales to overtake those of its previous flagship smartphone, the Galaxy Note, in the second half. It is expected to present its latest brochures on August 10.

BEST Q2 PROFIT SINCE 2018

Samsung’s operating profit rose to 14.1 trillion won ($10.8 billion) for the quarter ended June 30 from 12.57 trillion won a year earlier, its highest second-quarter profit since 2018. and also slightly more than his own estimate of 14 trillion won.

The profit included chip profit of 9.98 trillion won and mobile business profit of 2.62 trillion won.

“Fundamental demand for servers (memory chips) will remain strong as investments in core infrastructure and new growth areas such as AI and 5G are expected to continue to expand, focusing on major data center companies,” Samsung said.

TSMC (2330.TW), the world’s largest contract chipmaker, earlier this month also touted demand for its high-tech chips used in data centers. read more

However, smaller rival SK Hynix 000660.KS said on Wednesday that demand for server memory chips is likely to decline in the second half as data center customers deplete their inventory as they prepare to the recession read more

Samsung’s April-June revenue rose 21% to 77.2 trillion won.

A strong dollar also helped Samsung’s chip profits, boosting its operating profit by about 1.3 trillion won compared to the previous quarter, the company said.

Samsung’s chip sales are mostly in dollars, while it reports earnings in Korean won, so a firm dollar translates to higher chip earnings.

Shares of the company rose 0.7% in afternoon trading, versus a 1% rise in the broader market. (.KS11) and a 0.3% drop in shares of memory chip rival SK Hynix.

Reporting by Joyce Lee and Heekyong Yang; Edited by Himani Sarkar

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