Samsung continues to face significant challenges as its Q2 2023 results show another staggering 95 percent year-over-year drop in profits. The company’s earnings for the quarter amounted to KRW 0.67 trillion ($524.9 million), a substantial decrease from the KRW 14.1 trillion ($10.7 billion) reported in Q2 2022.
Although Samsung is widely recognized for its electronics and appliances, its profit structure reveals that it heavily relies on its memory business. In more normal times, memory (NAND and RAM) constitutes approximately 55 percent of the company’s profits, while mobile contributes 22 percent, and displays account for 11 percent. Samsung’s LSI division, responsible for foundry and Exynos chips, comprises 6.9 percent, while other consumer electronics, despite their prominent shelf presence, only contribute 4 percent to profits.
While consecutive 95 percent profit declines are undoubtedly concerning, Samsung was anticipating this downturn. The company is grappling with an oversupply of unsold chips, leading to reduced prices and subsequently lower profits. During the pandemic, memory companies stockpiled chips, and while some competitors cut production in November 2022 in anticipation of a market slowdown, Samsung delayed its response until April 2023, resulting in a substantial buildup of unsold inventory. As part of its strategy to address this issue, Samsung announced a cut in memory production to regain control over its inventory.
Despite its other divisions contributing to a small profit in the first half of 2023, the memory division remains a major concern for Samsung, as it reported an operating loss of $7 billion for the year thus far. The company faces the challenge of navigating through the current chip market conditions while seeking to revive its profit margins.