Samsung Electronics workers stand with wafers at its chip contract manufacturing facilities in Hwaseong, South Koreareported just enough earnings data on Thursday to tease us about what might be heading our way. Second quarter revenue and operating profit at the South Korean giant portend a tough second half for global technology hardware manufacturers.
What we do know so far, though, is that prices of its bread-and-butter products are weakening. Although Samsung is best known for smartphones, and recently grabbed headlines for claiming to be first to make semiconductors at the advanced 3-nanometre node , a large swathe of its revenue and bulk of profit comes from making memory chips, notably DRAM, which helps speed up a computer, and flash, which stores data.
Slowdowns in commodity products tend to have a multiplier effect. A 10% drop in prices coupled with a 10% fall in demand means a 19% drop in revenue . A 15% decline in both equates to a 44% hit on sales. This means the bottom could fall out of the memory-chip market very quickly.Samsung’s announcement “may push analysts to cut forecasts for the firm’s 2022 operating profit by 4-6%”, Bloomberg Intelligence analyst Masahiro Wakasugi wrote after the announcement.