Samsung Electronics posts strong Q2 profit driven by chips sales

South Korean tech major, Samsung Electronics, posted strong second-quarter (April-June) profits, which analysts said, were driven by sustained demand for memory chips, despite lower smartphone shipments. 

The company posted an operating profit of 14 trillion won ($10.7 billion), up 11% from 12.57 trillion won a year earlier, lesser than its estimate of a 14.45 trillion won by U.K-based provider of financial market data, Refinitiv. The chipmaker's revenue however, rose 21% to 77 trillion won, in line with estimates.

The strong quarter for Samsung, driven by its chip business, comes at a time when other chipmakers including Micron and Advanced Micro Devices have also recently signalled of the global ongoing chip shortage since the pandemic hit, with no signs of improvement.

Prices of specific DRAM chips, used in devices and servers, fell about 12% last month from a year ago, according to data provider TrendForce. Prices of NAND Flash chips, used for data storage, are also projected to fall as much as 5% in the July-September period from the previous quarter.

Samsung's profits however have been secured as large U.S. tech firms such as Amazon, Microsoft, Alphabet's Google and Meta that use a lot of data centre services kept buying chips to meet cloud demand, believe experts.

Analysts are painting a bleak picture for the second half, as the ongoing war in Ukraine, rising inflation and China's COVID-19 lockdowns are dragging down demand for, and consumer spending on, electronic devices. Global shipments of consumer devices, such as mobile phones and PCs, are on pace to decline 7.6% this year, according to June research by technology research firm Gartner.

"A perfect storm of geopolitics upheaval, high inflation, currency fluctuations and supply chain disruptions have lowered business and consumer demand for devices across the world, and is set to impact the PC market and the hardest in 2022," said as Ranjit Atwal, senior director analyst at Gartner.

Samsung shipped 74 million smartphones in the first quarter.  According to Counterpoint Research, global smartphone shipments fell 10% year-on-year to 96 million units in May, a significant drop caused by supply chain issues and demand returning to lows. before the pandemic.