Let's check in with Samsung to see how it's riding out the memory glut. Operating profit down 56%. Oops.
Chalk that up as a third quarter of consecutive decline
Samsung Electronics has estimated that operating profit for its second calendar quarter of 2019 will fall by a whopping 56 per cent due to continued crappy demand for memory chips.
The preliminary numbers were outlined today: revenue is projected to fall 4.2 per cent to ₩56 trillion ($47.6bn) and income from operations is expected to more than halve to ₩6.5 trillion ($5.5bn). Both sets of figures beat analyst expectations.
Samsung provided virtually no commentary to accompany the raw data but did confirm the estimates include a "one-time gain related to the display business".
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This pertains to Samsung's agreement with Apple, analysts believe, with the iPhone maker paying compensation for buying fewer OLED displays from Sammy than contractually agreed. Apple has seen its iPhone sales crash by double digits so far in its fiscal '20.
The semiconductor industry has flipped from demand outstripping supply to a glut of inventory sat in the channel awaiting a new home. This has dented average sales price as manufacturers used the only competitive weapon in their armoury to shift stocks.
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In a nod to this, Samsung revealed in late April that it will invest $155bn by 2030 to develop its logic memory chip biz and build production lines to make non-memory processors to order for customers.
Some 54 per cent of that expenditure is to be used for R&D, and the remainder for "production infrastructure". Samsung said it will hire 15,000 staff to help with the effort.
NAND and DRAM markets are furiously competitive, and Samsung wants to diversify into logic chips. Logic chips carry out logic-based processing, unlike memory chips, which store a value or present it.
Samsung's final audited numbers for Q2 will be out later this month, and will equate to the third consecutive decline in profits. ®