A Samsung Galaxy Z Fold 5 smartphone, left, a Galaxy Z Flip 5 smartphone through the Galaxy Unpacked occasion in Seoul, South Korea, on Wednesday, July 26, 2023. Samsung launched the fifth technology of its foldable smartphones on Wednesday, looking for to counter a sluggish marketplace for units and upcoming rival merchandise from Apple Inc.
SeongJoon Cho | Bloomberg | Getty Pictures
Samsung Electronics posted a second-quarter revenue drop Thursday as weak demand for reminiscence chips persists.
Listed here are Samsung’s second-quarter outcomes versus estimates:
Income: 60.01 trillion Korean gained (about $47.21 billion), vs. 60.8 trillion Korean gained anticipated by analysts, in accordance with Refinitiv consensus estimates.Working revenue: 0.67 trillion Korean gained, vs. 0.6 trillion Korean gained anticipated by the corporate.
Samsung reported gross sales slipped 22% from a yr in the past, whereas working revenue plunged 95%. Earlier this month, Samsung estimated second-quarter income to be 60 trillion Korean gained and working revenue to be 600 billion Korean gained.
Samsung is the world’s largest maker of dynamic random-access reminiscence chips, that are present in client units reminiscent of smartphones and computer systems.
“World demand is anticipated to step by step get well within the second half of the yr which ought to result in an enchancment in earnings pushed by the element enterprise,” Samsung mentioned in its earnings report.
“Nevertheless, continued macroeconomic dangers might show to be a problem in such restoration in demand,” mentioned the South Korean agency.
Samsung shares rose 2.29% Thursday morning.
Give attention to higher-end merchandise
Samsung mentioned that sturdy synthetic intelligence demand led to extra DRAM shipments than anticipated within the second quarter, in contrast with the primary quarter.
“The reminiscence enterprise noticed outcomes enhance from the earlier quarter as its concentrate on excessive bandwidth reminiscence (HBM) and DDR5 merchandise in anticipation of sturdy demand for AI purposes led to higher-than-guided DRAM shipments,” mentioned Samsung.
Each DRAM and NAND flash reminiscence chips additionally noticed “extra restricted value drops” which improved second-quarter efficiency, in contrast with the primary quarter, Samsung mentioned.
“As server prospects continued stock adjustment, general buy demand had not but recovered. As a result of robust demand for generative AI, nonetheless, funding from the info heart sector was focused on AI servers,” mentioned Samsung.
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Excessive-performance reminiscence chips are required to coach generative AI fashions reminiscent of ChatGPT. Such chips allow generative AI fashions to recollect particulars from previous conversations and person preferences as a way to generate humanlike responses.
“Trying to the second half of the yr, the market is anticipated to step by step transfer towards stability contemplating rising manufacturing cuts within the trade, whereas stock changes by prospects are prone to wind down,” mentioned Samsung.
Samsung mentioned it would concentrate on high-value-added merchandise reminiscent of DDR5, LPDDR5x and HBM because it expects a restoration in demand, in addition to enhance investments in infrastructure, R&D and packaging expertise.
Weak electronics demand
Samsung mentioned that general cell phone market demand declined from the primary quarter as a result of continued macroeconomic challenges reminiscent of inflation.
The hype from the Galaxy S23 sequence launch within the first quarter additionally light, mentioned Samsung. Delayed market restoration additionally posed additional challenges to second-quarter gross sales.
“However, the Galaxy S23 sequence was capable of obtain greater outcomes than its predecessor within the first half, when it comes to each quantity and worth,” mentioned Samsung, including that it plans to elevate gross sales of the Galaxy S23 and Galaxy A sequence.
World shipments of smartphones are anticipated to say no 3.2% in 2023 to 1.17 billion models, in accordance with international market intelligence agency Worldwide Information Company. The agency lowered its forecast from February, pushed by components reminiscent of “a weaker financial outlook” and “ongoing inflation.”
Smartphone and PC producers are grappling with extra inventories of reminiscence chips after stockpiling to satisfy elevated demand for client units through the pandemic. Inflation has led to customers chopping again on purchases of those items, driving down costs for reminiscence chips.
“Our conversations with channels, provide chain companions, and main OEMs all level to restoration being pushed additional out and a weaker second half of the yr,” mentioned Nabila Popal, IDC’s analysis director.
“Client demand is recovering a lot slower than anticipated in all areas, together with China.”
In its Thursday earnings name, Samsung informed analysts that it could be making extra manufacturing cuts on sure DRAM and NAND merchandise “to additional speed up stock normalization.”
Samsung, Micron and SK Hynix have introduced capital expenditure cuts to decrease manufacturing previously months.
Give attention to premium foldable telephones
Samsung mentioned it would concentrate on the newly launched high-end Galaxy Z Flip 5 and Galaxy Z Fold 5 sequence to cement its main place within the international foldable smartphone market.
“Regardless of how unhealthy the reminiscence enterprise is, the great factor is no less than the premium a part of the market helps to drive a few of their earnings or no less than offset a few of the injury attributable to the the reminiscence facet of the enterprise,” mentioned Bryan Ma, vp of units analysis at IDC, on CNBC’s “Squawk Field Asia” on Thursday.
However the Galaxy S23 sequence nonetheless drives most of Samsung’s earnings within the premium smartphone house, mentioned Ma.
“We do additionally must remember the fact that foldables truthfully usually are not an enormous a part of it, even when they’re the premium a part of the market. It is truly extra of the standard sweet bar Galaxy S23 that basically drives loads of their earnings no less than within the premium half,” mentioned Ma.
Nonetheless, it provides Samsung an edge over its rival Apple. “It is garnering mindshare. Issues like a foldable cellphone that Apple would not have but,” mentioned Ma.