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Samsung Elec announces a higher Q2 profit owing to solid server-chip demand

Charlie Brooks

Jul 07, 2022 11:18

Samsung Electronics (OTC:SSNLF) Co Ltd announced its greatest April-through-June profit since 2018 with an 11 percent year-over-year gain, as demand for its memory chips from server customers more than offset decreased sales to smartphone manufacturers due to inflation.

The world's leading memory chip and smartphone manufacturer stated Thursday that its second-quarter operating profit grew to 14 trillion won ($10.73 billion) from 12.57 trillion won a year earlier.

It was quite close to Refinitiv's SmartEstimate of 14,45 trillion won.

In agreement with market estimates, Samsung (KS:005930) announced in a short earnings report that sales likely climbed by 21 percent year-over-year to 77 trillion won.

This month, Samsung will provide detailed financial results.

Large U.S. IT companies that rely heavily on data center services continued to acquire chips to meet cloud demand, insulating Samsung's chip revenue from a potential client oversupply after two years of high demand.

According to the data source TrendForce, the price of some DRAM chips, which are utilized in electronic devices and servers, decreased by around 12 percent last month compared to the same time period one year prior. As demand for smartphones and laptops decreases, analysts believe that prices will continue to fall.

"Server DRAM is currently the only feasible sales channel... As a result, Korean manufacturers were the first to signal a willingness to contemplate a quarterly price cut of more than 5 percent (for server goods) "DRAMS," according to TrendForce.

According to TrendForce, the costs of NAND Flash chips, which are used in electronic devices for data storage, are projected to decline by as much as 5 percent between July and September compared to the previous quarter.

Following two profitable pandemic years in which customers purchased devices for remote work, chipmakers throughout the globe are observing a fall in demand.

According to analysts, rising prices, worries of a dramatic market collapse, the Ukraine war, and China's COVID-19 lockdowns have hampered smartphone sales, leaving server chip demand as the only bright light.

During morning trade, the price of Samsung's stock jumped by 0.9%.