Samsung recorded its lowest operating profit in 14 years for its April to June quarter this year due to the continued downturn of the memory chip market.
The South Korean tech giant said in its earnings guidance that it recorded 60 trillion won in revenue and 0.6 trillion won in operating profit, a drop of 22.28% and 95.74%, respectively, from a year ago.
It is the company’s second consecutive quarter of a significant profit drop __ Samsung’s profit in the prior quarter also dipped by 96%.
As Samsung will disclose its full earnings report later in the month the precise details are yet unclear but analysts expect the poor performance of its chip division to be the cause of the profit drop, as it was in the prior quarter. However, Samsung’s smartphone business is expected to have performed solidly.
The memory chip industry is currently going through a supply glut __ where the supply of chips outpaces demand __ which has affected the bottom lines of all three major memory chip makers, Samsung, SK Hynix, and Micron.
Samsung itself has warned during the conference call for the first quarter that it expects the downturn to continue for at least to the second quarter and it expected difficulty throughout the year.
However, the South Korean tech giant, the world’s largest memory chip maker, also stated that the outlook for the memory chip market in the long term was bright from trends such as AI and high-performance computing.
The memory chip market has traditionally run in cycles, where a downturn is followed by a period of high growth. Looking ahead, Samsung’s third-quarter earnings will be a barometer of whether the memory chip market will start recovering within the year.