Technology

Samsung: record in semiconductors boosts profits

(Photo: 123RF)

Seoul. South Korean giant Samsung Electronics on Thursday said its operating profit surged 12.2% year-on-year in the second quarter of 2022, thanks to record profits from its semiconductor business.

The semiconductor sector “achieved record quarterly earnings,” the group said in a statement, adding that it increased production and expanded its product catalog.

“Revenues from the memory business improved (…) as the company focused on meeting high demand for servers,” Samsung added.

In June, Samsung Electronics became the first manufacturer in the world to mass-produce advanced 3nm chips, aiming to match and eventually surpass Taiwan’s TSMC in the race to produce the most advanced components.

The new chips will be smaller, more powerful and more efficient and will be used in high performance computing applications before being integrated into consumer devices such as mobile phones.

The vast majority of the world’s most advanced microchips are made by just two companies, Samsung and TSMC, both of which are currently working at full capacity to make up for the global shortage.

Samsung posted 14.1 trillion won (€10.6 billion) in operating income from April to June, with sales up 21.3% to 77.2 trillion won, according to a press release.

Net profit (group share) reached 10.950 billion won, up 15.9% year on year.

The decline in the number of smartphones

Samsung, the world’s leading smartphone maker ahead of America’s Apple, said both demand and earnings declined in the second quarter compared to the division’s first quarter.

“Aggregate demand declined quarter-on-quarter due to geopolitical concerns and concerns about inflation,” he explained.

“Profitability declined quarter-on-quarter to some extent due to higher component and logistics costs, as well as the negative effects of exchange rate fluctuations,” the group continued.

The won’s weakness against the US dollar, however, benefited the company, which benefited from a 1.3 trillion won foreign exchange difference compared to the previous quarter.

“Samsung’s mobile business is expected to improve in the second half compared to the second quarter, which was heavily impacted by external factors such as the war in Ukraine,” said Pak Sun-soon, analyst at Cape Investments & Securities.

Pessimism for semiconductors

However, according to him, the decrease in demand for semiconductors, associated with fears of a global recession, is negatively affecting the company’s profit forecasts.

“Samsung’s overall profit is dependent on the semiconductor business. Given the expected drop in demand, sales may weaken in the second half of the year,” he predicted.

Global demand for chips is “entering a period of weakness that will last until 2023,” said Richard Gordon, an analyst at market research firm Gartner, in a report cited by Bloomberg.

“We are already seeing weakness in semiconductor end markets, especially those exposed to consumer spending” by the general public, he added.

Memory chips have been at the center of global geopolitical tensions in recent months, with every nation seeking to secure its supplies at any cost.

In May, US President Joe Biden took a symbolic trip to South Korea, visiting Samsung’s giant semiconductor factory in Pyeongtaek, near Seoul.

Russia’s invasion of Ukraine “once again underscored the need to secure our critical supply chains,” Mr. Biden said of the matter, stressing the importance of strengthening technology partnerships among allied nations.

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