Samsung’s profits expected to hit a 14-year low due to sluggish chip sales.

Samsung Electronics could see a major dip in its profits likely to tank as much as 96% on a year-on-year basis. It means that the profits for the company will be the lowest this quarter, in the last 14 years.

The major dent in the company’s bottom line comes as the tech giant’s cash cow business of chip sales is seeing a major slowdown. Samsung is the world’s largest chip manufacturer currently and the slowdown in the chips business has been eating majorly into the company’s profits.

Analysts at Refinitiv SmartEstimate note that in the April-June quarter, the operating profit for Samsung shall drop to 555 billion won ($427 million). This would be a significant drop in the operating profits of 14.1 trillion won during the same quarter last year.

This is because the chip division, which has historically been the company’s main source of profit, is likely to experience losses of approximately 3 to 4 trillion won in the quarter. These losses can be attributed to the declining prices of memory chips and the reduction in inventory values.

If so, it would mean that Samsung will be recording the lowest quarterly profit since the fourth quarter of 2008. Back in that year, Samsung Electronics had reported a consolidated profit of 740 billion won.

Samsung Faces Brunt of Falling Chip Prices

During the last quarter, the price of DRAM memory chips – widely used in PCs, smartphones, and servers – continued to drop by 13-18%, as per TrendForce. This is because chip buyers refrained from purchasing new chips as well as used-up inventories, reports Reuters.

However, the decrease in prices of memory chips has slowed down compared to previous quarters. Experts predict that the prices will reach the lowest point around the third quarter and a significant recovery might not happen until 2024.

Despite the challenging market conditions, Samsung is focusing on expanding its presence in the field of artificial intelligence (AI). This includes areas like high bandwidth memory (HBM) and chip contract manufacturing.

In terms of its mobile business, Samsung is expected to report an operating profit of around 3.3 trillion won. This is because cost-cutting measures have offset a slight decline in smartphone shipments compared to the first quarter when Samsung released its latest flagship model.

Later this month in July, Samsung will be unveiling its latest foldable smartphone in Seoul. Analysts expect it to dominate the premium smartphone market at least until Apple releases its next iPhone version.

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