Samsung’s Profits Fall 96% as Chip DRAMa Continues
Key Takeaways
- A global oversupply of microchips has impacted Samsung’s profits
- Profits plummeted from $10.8bn in April to June 2022 to $458m in April to June 2023
- Gartner forecasts a decrease of 11.2% in 2023’s worldwide semiconductor revenue
Throughout the years, manufacturers have contended with memory chip shortages. Even Nintendo saw the effects of the shortage in 1988, leading to a delay in the release of Zelda II: The Adventure of Link.
In more recent times, the pandemic contributed to another shortage: More people purchased computers to work from home, and supply chains faced immense disruption.
Now, the tables have turned — it’s a fickle market. Instead of memory shortages, we’ve got too much of the stuff. Of course, oversupply means lower prices, and that’s impacting the profits of companies like Samsung. Let’s find out more about their troubles.
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Why did Samsung’s profits drop?
To avoid confusion, we’re referring to chips, microchips, and semiconductors interchangeably throughout this article. Yes, there’s a distinction; no, we’re not that nerdy.
Pretty much every industry relies on microchips, like manufacturing, healthcare, and communications.
We’ve all heard about the semiconductor shortage. That’s because they’re in basically everything, including the device you’re reading this on, your refrigerator, and the modern car in your garage.
For context, 2021 saw sales of 1.14 trillion semiconductors, while Lays only managed a thousandth of that. (Yep, we’re running with that terrible chip joke.)
Thankfully, a slowdown in consumer purchases allowed the semiconductor industry to recover. That’s great news for chip-reliant industries and our never-ending need for new tech.
Unfortunately for Samsung, the global chip overload includes random access memory (RAM). Samsung has a serious hold on that market, producing 40% of the world’s dynamic random access memory (DRAM).
To compound the issue, research from Gartner In anticipates a decrease of 11.2% in worldwide semiconductor revenue in 2023 before a 2024 recovery.
Needless to say, Samsung has taken a whopping hit with this development. The big headline figure is that its operating profit dropped by 96%, from $10.8bn in April to June 2022 to $458m in April to June 2023. That’s the tech giant’s lowest quarterly profit since 2009.
As a result, Samsung is planning on scaling back chip production.
Effects on Samsung’s stock
Wondering how much this news tanked Samsung’s stock? After the announcement, the stock dropped almost 2% during Wednesday’s trading. And it’s still dropping.
Still, Samsung’s stock has seen a 24% rise this year, even accounting for this pretty large blip. We think they’ll be just fine.
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