Samsung's quarterly growth is expected to be its weakest in two years
Financial Union News On July 7 (Editor Liu Rui)Samsung Electronics Co., the world's largest memory chip maker, on Thursday forecast its slowest profit growth in more than two years as cooling consumer electronics demand and rising raw material costs squeezed margins.
The outlook for memory chip demand may not be rosy, as micron, another major maker of memory chips, cut its guidance last week amid recrecession worries about global growth, and Samsung cited "significant challenges" in its business outlook.
Samsung's operating profit grew at its slowest pace in more than two years
Samsung Electronics Co. on Thursday forecast its slowest profit growth in more than two years for the fiscal second quarter ending in June.
The company's second-quarter operating profit is expected to rise 11 percent from a year earlier to 14 trillion won ($10.7 billion), below analysts' average estimate of 14.6 trillion won, the report said. Revenue for the fiscal second quarter is expected to rise 21 percent from a year ago to 77 trillion won, slightly ahead of analysts' expectations.
Samsung Electronics is due to announce its financial results later this month.
The better-than-expected revenue sent Samsung shares up about 3% in South Korean trading Thursday morning. But the stock is down more than 26% so far this year.
Slowing profit growth at Samsung, the world's largest supplier of memory chips and a leading smartphone maker, is likely to deepen concerns about consumer electronics demand. Samsung's disposable income is being hit directly by rising interest rates and costs at a time when consumers and corporate customers are cutting back on spending to prepare for a potential recession.
Lee Seung-woo, an analyst at Eugene Investment Securities, said Samsung's smartphone shipments likely fell more than 10 million units to 63 million units in the second quarter from the first, while PC sales also likely fell sharply from the first quarter as people cut back on higher-priced IT products.
"Global macroeconomic uncertainties remain," said Nam Dae-jong, analyst at eBEST Investment & Securities. The Fed's rate hike triggered currency volatility and raw material and logistics costs continued to rise. At the same time, uncertainty on the demand side is increasing."
Recession gloom affects memory chip demand
South Korea's chip inventories surged more than 50 per cent in May from a year earlier, according to the National Bureau of Statistics, suggesting sluggish consumer demand is directly affecting the memory chip industry.
Samsung and peer SK Hynix are two of the world's top three memory chip makers. But shares in both companies are down more than 20% this year as fears of a potential recession grow.
In its last earnings call, Samsung warned of "significant" challenges to its business outlook as global macro risks such as inflation and the russia-Ukraine war could set off knock-on effects.
Micron, the world's third-largest DRAM chip maker, cut its guidance last week and gave a downbeat outlook for the current quarter. This could mean that Samsung's DRAM and NAND chip sales targets are also likely to be weak.
Global DRAM demand growth is likely to fall short of 15-20% in 2022 and NAND chip growth may not exceed 25% due to weak PC and smartphone demand. DRAM chip prices fell about 12 percent last month from a year earlier, and are expected to continue falling, according to research firm TrendForce.