Samsung Electronics Co estimated yesterday that its operating profit would plunge nearly 25 percent on year in the second quarter of the year, as cheap Chinese devices and a strong South Korean won hammered down its share of the global smartphone market.
Operating profit was estimated at 7.2 trillion won (US$7.1 billion) for the April-June period, compared to 9.53 trillion won a year ago — the South Korean electronic giant’s third straight quarter of year-on-year decline.
The second-quarter operating profit was down 15.2 percent from the 8.49 trillion won posted in the previous quarter.
The profit drop had been widely expected, but yesterday’s forecast still missed analyst estimates.
Samsung did not provide net income or details of division earnings ahead of the official earnings report to be filed later this month.
In an unusual move, yesterday’s forecast was accompanied by an explanatory note that the company said was to “address market and investor concerns” prior to the audited earnings release.
“The company witnessed a slowdown in the overall smartphone market growth and saw increased competition in the Chinese and some European markets,” it said.
“This led to higher inventories for the medium and low-end smartphones,” it said, adding that earnings had also been hit by the appreciation of the won against the US dollar, euro and most emerging-market currencies.
The surging won is currently running at six-year highs against the dollar, impacting South Korea’s export-driven economy.
Sales in the April-to-June period stood at 52 trillion won, down 9.5 percent from a year earlier and 3.1 percent from the first quarter.
Samsung said it “cautiously expects” a more positive outlook in the third quarter, with the release of its new smartphone lineup, and a much lower marketing expenditure compared to the second quarter.
However, the next quarter is expected to see competition heat up with the anticipated launch of the iPhone 6 by chief rival, Apple Inc.
Samsung said that “price competition” in China had boosted inventory in a crucial smartphone market — a situation exacerbated by weaker demand in Europe.
The company does not disclose smartphone shipments, but analysts say it moved about 78 million units in the quarter ended on June 30 — short of the 90 million units many in the market had anticipated.
The market had largely factored in the profit drop and Samsung shares closed up 0.23 percent on the day at 1.295 million won.
Samsung maintained a leading position in the global smartphone market in the first quarter of this year, but its market share fell for the first time in four years to 31.2 percent from 32.4 percent a year ago.
WASHINGTON’S INCENTIVES: The CHIPS Act set aside US$39 billion in direct grants to persuade the world’s top semiconductor companies to make chips on US soil The US plans to award more than US$6 billion to Samsung Electronics Co, helping the chipmaker expand beyond a project in Texas it has already announced, people familiar with the matter said. The money from the 2022 CHIPS and Science Act would be one of several major awards that the US Department of Commerce is expected to announce in the coming weeks, including a grant of more than US$5 billion to Samsung’s rival, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), people familiar with the plans said. The people spoke on condition of anonymity in advance of the official announcements. The federal funding for
HIGH DEMAND: The firm has strong capabilities of providing key components including liquid cooling technology needed for AI servers, chairman Young Liu said Hon Hai Precision Industry Co (鴻海精密) yesterday revised its revenue outlook for this year to “significant” growth from a “neutral” view forecast five months ago, due to strong demand for artificial intelligence (AI) servers from cloud service providers. Hon Hai, a major assembler of iPhones that is also known as Foxconn, expects AI server revenues to soar more than 40 percent annually this year, chairman Young Liu (劉揚偉) told investors. The robust growth would uplift revenue contribution from AI servers to 40 percent of the company’s overall server revenue this year, from 30 percent last year, Liu said. In the three-year period
LONG HAUL: Largan Energy Materials’ TNO-based lithium-ion batteries are expected to charge in five minutes and last about 20 years, far surpassing conventional technology Largan Precision Co (大立光) has formed a joint venture with the Industrial Technology Research Institute (ITRI, 工研院) to produce fast-charging, long-life lithium-ion batteries for electric vehicles, mobile electronics and electric storage units, the camera lens supplier for Apple Inc’s iPhones said yesterday. Largan Energy Materials Co (萬溢能源材料), established in January, is developing high-energy, fast-charging, long-life lithium-ion batteries using titanium niobium oxide (TNO) anodes, it said. TNO-based batteries can be fully charged in five minutes and have a lifespan of 20 years, a major advantage over the two to four hours of charging time needed for conventional graphite-anode-based batteries, Largan said in a
Taiwan is one of the first countries to benefit from the artificial intelligence (AI) boom, but because that is largely down to a single company it also represents a risk, former Google Taiwan managing director Chien Lee-feng (簡立峰) said at an AI forum in Taipei yesterday. Speaking at the forum on how generative AI can generate possibilities for all walks of life, Chien said Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) — currently among the world’s 10 most-valuable companies due to continued optimism about AI — ensures Taiwan is one of the economies to benefit most from AI. “This is because AI is