TechDogs-"Who’s Winning In Samsung’s Profit And Loss Game?"

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Who’s Winning In Samsung’s Profit And Loss Game?

By TD NewsDesk

TD NewsDesk

Updated on Fri, Apr 28, 2023

Overall Rating
Money, money, money... Money!

With the recent economic slowdown, people are reconsidering investments in tech devices, leading to lowered demand. This has left device manufacturers with large inventories of memory chips, which they purchased in large numbers during the pandemic.

This has led to reduced purchases of memory chips this year and Samsung felt the pinch with a reported record loss of 4.58 trillion won (around $3.4 billion) for the division, according to a report by Bloomberg.

Furthermore, according to a CNBC report, Samsung’s operating profit was down to 640 billion won ($478.6 million) for the January-March quarter, a decrease of 95% from the year before and its smallest quarterly profit in the last 14 years. Interestingly, this division of Samsung usually performs well, with a reported 8.45 trillion won (around $6.3 billion) profit a year earlier.

In response, Samsung plans to cut memory chip production by 70% but isn’t considering cuts for memory chip investments, saying, “We have cut short-term production plans, but as we project solid demand for the mid-to-long term, we will continue to invest in infrastructure to secure essential cleanrooms and to expand R&D investment to solidify tech leadership.”

Samsung remains positive about the drop in demand and believes in the second half of the year, inventories will deplete and purchases will increase. Jaejune Kim, Executive VP of Samsung's memory business, said, "We expect inventory levels to start dropping in the second quarter."

TechDogs-"Image Of Samsung's S23 Series"
However, it wasn’t all bad news for the company, as its smartphone division’s profit increased 3% to 3.94 trillion won (around $2.9 billion) compared to the previous year, despite revenue being down 2% to 30.74 trillion won (around $22.9 billion).

This was partly due to Samsung releasing its latest line of flagship smartphones, particularly the $1,200 S23 Ultra, in the first quarter, which gave its sales a boost.

According to Jene Park, Senior Analyst at Counterpoint, “Samsung is focusing on profit rather than shipments.” Essentially, the company is catering to premium smartphones, picking quality over quantity.

Samsung said in a statement, “The premium market grew in terms of both volume and value even amid weak smartphone demand caused by lingering macro uncertainties. Sales grew and profitability recovered to reach double-digits on the back of strong sales of new premium models, centering on S23 Ultra, and efforts to enhance operational efficiencies.”

TechDogs-"Image Of Jene Park, Senior Analyst At Counterpoint"
Samsung believes the smartphone market will pick up in the second half of the year in terms of shipments and revenue. It already witnessed a 16% increase in shares.

Do you think the smartphone and memory chip market will pick up this year? Would you consider buying any devices this year? Let us know in the comments below!

First published on Fri, Apr 28, 2023

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