Despite a supply reduction, Samsung Electronics Co. Ltd. said on Friday that its operating profit for the second quarter was anticipated to fall by 96%. This news was broadly in line with expectations.

In a brief preliminary earnings announcement, the largest memory chip and smartphone manufacturer in the world estimated that its operational profit decreased to 600 billion won ($459 million) in April to June from 14.1 trillion won a year earlier.

According to company data, it would be Samsung’s lowest profit since a 590 billion won profit in the first quarter of 2009.

The earnings largely matched a 555 billion won Refinitiv SmartEstimate, which gives more weight to expert estimates that are more reliable overall.

Early morning trading saw a 1.4% decline in Samsung shares, outpacing a 0.6% decline in the broader market.

On July 27, Samsung is slated to reveal specific financial results.

The company recorded a staggering 4.58 trillion won loss in its chip sector for the January to March quarter as memory chip prices continued to decline and inventory values plummeted.

However, losses in Samsung’s memory chip division presumably decreased in the second quarter due to higher sales of DRAM chips, which are used in servers, PCs, and mobile devices.

“Although memory prices fell, the drop was not as large as feared,” said Park Kang-ho, analyst at Daishin Securities.

“When full earnings are announced, investors will be looking for third-quarter signals – how much effect the production cut will have in the third quarter, any demand recovery, and whether higher-end DRAM and high bandwidth memory (HBM) products are set to improve (Samsung’s) profit mix.”

Analysts predict that the memory chip downturn, which started last year, will peak in the third quarter, albeit the recovery may not be strong at first.

“DRAM memory prices are expected to rebound in earnest from the fourth quarter, and double-digit quarterly increases are expected from the second half of 2024,” said Greg Roh, head of research at Hyundai Motor Securities.

“Unlike its competitors, (Samsung) is expected to maintain its investment in memory chips this year … which will pay off in increased market dominance in 2025.”

In the mobile industry, Samsung is anticipated to reveal its newest foldable handsets later this month in Seoul, weeks ahead of schedule. According to analysts, this move is part of a strategy to maintain market dominance for a longer period of time before rival Apple publishes its newest iPhone.

Analyst predictions for Samsung’s mobile profitability in the third quarter, however, varied since, despite recent improvements in economic indicators, consumer confidence in the global smartphone industry remained low.

According to Samsung’s announcement, revenue for the months of April through June likely decreased 22% to 60 trillion won from the same time last year.

(Adapted from CNBCTV18.com)